Chartered Accountants Australia and New Zealand (CA ANZ) today welcomed the exposure draft legislation to fight tax evasion and money laundering by banning cash transactions over $10,000.
The black economy is estimated at A$50 billion or 3 per cent of Australia’s GDP.
CA ANZ Senior Tax Advocate Susan Franks says participating in the black economy creates unfair competition and reduces tax collections which then inhibits governments from funding needed social and economic infrastructure.
“More can and should be done to tackle the black economy,” said Franks.
“The ATO and law enforcement are continually discovering businesses offering mates rates for cash, workers being paid cash ‘under the table’ rather than having their tax withheld each payday like the rest of us and cashed-up individuals claiming government benefits.
“The anonymity of cash ensures those participating in black economy remain under the radar, so by restricting cash payments it will become more difficult for them to benefit from their activities.
“They are now forced to interact with systems that have greater levels of scrutiny.”
Data from the Reserve Bank of Australia (RBA) shows us the use of cash rapidly diminishing, with the number of cash payments almost cut in half between 2007 and 2016, from 69 per cent to 37 per cent.
“An extremely conservative RBA estimate shows that $1 billion is warehoused by the black economy with a further $5 billion used for operational purposes which represents up to 8 per cent of bank notes in circulation,” said Franks.
“In this day and age where you can pay your bills on a watch, it’s getting harder to defend the use of cash which is more prone to use for, and by people conducting, illegal activities.
“How many news reports do we need to see of police displaying piles of ill-gotten cash?
This is one in a range of recommendations made in the final report of the Black Economy Taskforce. The report also urges the RBA to exert downward pressure on bank transaction fees to reduce the costs of debit card payments and dealing with financial institutions.
Franks said the legislation could be taken a step further by lowering the $10,000 cash payment limit and applying it to all payments, not just payments made to or by businesses.
“By broadening the scope of this legislation, it would make the law easier to enforce, and it would make it harder for black economy participants to operate,” she said.
“A study by the European Commission found the most effective thresholds are much lower, around €1,000 or A$1,630.”