| Cash
economy facing increased scrutiny
Media Release - Nat 03/86
The Tax Office is putting more resources into detecting people
operating in the cash economy in 2003-04 with tougher scrutiny
in high risk industries including building and construction,
hotels and clubs, motor vehicle retailers, clothing and textile
industry and business services.
This year the Tax Office will undertake over 70,000 compliance
reviews to detect and deal with businesses operating in the
cash economy. This is 25,000 more than last year.
More than 30,000 businesses can expect to be visited by one
of 660 tax officers specialising in the cash economy. In addition,
there are 2,400 other officers in the field enforcing compliance
generally with Australia's taxation laws.
Other industries to be scrutinised include restaurants, cafes,
takeaways, taxis, hairdressers, cleaning services, scrap metal
dealers, computer retailers, barter and the fishing industry.
Mr Carmody said the Commonwealth Government had provided
extra resources over recent years to fund the Tax Office's
compliance activities including dealing with the cash economy.
"In addition, changes made under the New Tax System
now mean there are in-built deterrents for those thinking
of operating in the cash economy and new reporting systems
make it a lot easier to detect people avoiding their obligations,
" Mr Carmody said.
"We are better placed now than ever before to detect
and address evasion in the cash economy."
The Australian National Audit Office (ANAO) has also commented
positively on the Tax Office's progress in addressing the
cash economy, concluding in a performance audit in 2002 that
the recommendations of the 1998 report of the Cash Economy
Taskforce had been substantially implemented.
The ANAO further stated with respect to the compliance dividend
of $3.5 billion over three years of additional tax estimated
to be raised as a result of the New Tax System, that "…ATO
projections based on revenue-to-date show that expectations
have been exceeded."
This ANAO report provides further evidence of the success
of the New Tax System reforms and the Tax Office's efforts
in addressing the cash economy.
"Additional resources provided by the Commonwealth Government
mean an extra 850 tax office compliance staff this year,"
Mr Carmody said.
"Our investigations of over 400 companies in the building
and construction industry alone have raised an additional
$120 million in taxes for the community since 2000.
"Businesses now must have an Australian Business Number
(ABN) to deal with other businesses or lose 48.5% of any payments
made to them in withholding tax. Valid tax invoices are needed
to claim GST credits and businesses must now report on a more
regular and up-to-date basis.
"Almost 4.2 million businesses have registered for an
ABN, and more than 2.2 million are also registered for GST.
This is many more than was expected and includes a substantial
number that voluntarily registered, despite being below the
mandatory registration threshold.
"Suppliers are required to quote their ABN or have tax
withheld by the payer (currently at the rate of 48.5%).
"Since the introduction of the New Tax System, over
$127 million has been withheld and remitted to the Tax Office
as a result of non-declaration of an ABN.
"The ABN has now become part of normal business practice,
with businesses generally unwilling to deal with suppliers
who do not quote an ABN or provide a valid tax invoice."
Mr Carmody said the Tax Office now has better audit trails
than ever before as a result of the New Tax System.
"Other new measures include the need for a business
to be both GST registered and in receipt of valid tax invoices
for its acquisition of goods or services, so that it may claim
a tax credit on those goods or services.
"The registration of the business ensures that it is
in the tax system and the tax invoices provide a clear audit
trail.
"The New Tax System also provides us with more real-time
information and gives us the ability to cross-match income
tax and GST information."
Mr Carmody warned anyone considering operating in the cash
economy that the Tax Office receives more than 40,000 tip-offs
from the community each year to its Tax Evasion Hotline 1800
060 062. Investigating community tip-offs resulted in the
Tax Office raising an extra $44 million in revenue last year.
Mr Carmody said there are a range of estimates of the cash
economy.
Academics use a range of methods to estimate the size of
the cash economy including the currency demand method which
has produced discredited estimates.
"This method has been criticised by the OECD as unreliable
and likely to produce implausibly large results."
Next month Mr Carmody will announce a series of further initiatives
to tackle the cash economy when he releases his response to
the third report received recently from the Cash Economy Taskforce.
The Taskforce includes a range of business, academic and
tax and accounting profession representatives.
CANBERRA
19 August 2003
Last Modified: Tuesday, 19 August 2003
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