EVASION AND INFORMALITY IN GST MICHAEL ANDREW AO CHAIR BLACK ECONOMY ADVISORY BOARD

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Tyrone Ray
5 years ago
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1 EVASION AND INFORMALITY IN GST MICHAEL ANDREW AO CHAIR BLACK ECONOMY ADVISORY BOARD

2 This tax cracks down on the black economy and that s the whole idea of it March 1999 Introducing the GST The losers are tax cheats, who are now finally paying their way July 2000

3 Human Ingenuity

responsibility Consumers and employees are always

4 Problem 1: Not reporting I paid in cash and didn t get an invoice, but their tax affairs are not my responsibility Consumers and employees are always innocent victims What my supplier does is their business

5 Problem 2: Identity Trade discounts Markets Food trucks

6 Problem 3: Business Registry Over 250 registers across government. Multiple ABNs Sham contracting Government shares information seamlessly

7 Problem 4: Phoenixing The intentional transfer of assets from an indebted company to a new company to avoid paying creditors, tax or employee entitlements.

8 Problem 5: Business-to-business arrangements Double claims for input credits but no GST remittance.

9 Problem 6: Illegal tobacco 1 ounce tobacco > 1 ounce Silver $150k smuggled tobacco = $10 million Criminal syndicates Image Source:

10 Problem 7: Offshore Suppliers Not registering for GST Includes offshore bookmakers and sports betting

11 Problem 8: Sales suppression software Approximately 1200 businesses identified Amnesty from offence if advise ATO by 3 April (transitional period).

12 In our estimates, the black economy in Australia has grown 50% since 2012 Since publication, the GST tax gap has increased to $5.3 billion

13 Government s 2018 Budget response 72/75 recommendations accepted

14 1 Moving people out of cash Digitalisation Real-time settlement / verification New Payment Platform Tax incentives - Audit risk - Trusted Taxpayer Lower non-cash alternatives Cash payment limit

Non-tax deductible payments New law to deny a tax deduction from 1 July 2019.

15 Non-tax deductible payments New law to deny a tax deduction from 1 July Payment to contractor where ABN not quoted and withholding obligations not met. Honesty defence

16 2 Strengthen identity underpinnings Certify individual Identity - Social media - Birth records - Bank account - Drivers licence Robust ABN - Data integrity Single business register

17 3 Best practice data sharing and analytics Public sector cultural shift required Privacy constraints Investment in public sector resources The data exists use smart algorithms

leading the way New Australian Government Procurement

18 4 A responsible supply chain agenda Ethical sourcing Blockchain Commercial consequence for cheating Government leading the way New Australian Government Procurement Process Procurement based on price and integrity Trusted trader standard

19 5 Improved and expanded tax reporting systems Taxable Payments Reporting System Originally only construction industry Now applying to: Cleaners Couriers Road Freight IT Contractors Security 1 July July 2019

20 Next step: Expand to the Sharing Economy

21 6 Overhauling incentives and deterrents - Education/training - Detection - Reporting - Cost effective, independent and visible enforcement - Focus on promotors - Visa/permanent residency

22 7 Cultural change is required The community is angry at the unfairness of the black economy Use behavioural economics to shape policy A national campaign is needed Smoking drink driving Littering Community Intelligence Image Source:

8 Disrupting crime and illegality Image Source: www.fbi.

23 8 Disrupting crime and illegality Image Source: Increased sophistication of organised crime Key is to disrupt financial flows National criminal database

24 Crackdown on phoenixing Legislation introduced into Parliament New offences and civil penalties Director Identity Number Extending director penalties to make directors liable for GST New ASIC recovery powers

A new Illicit Tobacco Taskforce Australian Border Force Department of Home Affairs Australian Criminal Intelligence Commission Australian

25 A new Illicit Tobacco Taskforce Australian Border Force Department of Home Affairs Australian Criminal Intelligence Commission Australian Taxation Office Australian Transaction Reports and Analysis Centre Director of Public Prosecutions. Investigate, prosecute and dismantle organised crime

26 Advisory Board established in 2018 Chair Government members Treasury Home Affairs ATO Pete Calleja National Tax Leader PwC Charles Cameron Represents contractors and Labour-hire Juliana Payne Representative of Hospitality Peter Strong Small Business Advocate (COSBOA) Michael Croker Tax Leader of Chartered Accountants Tania Chapman Representative of Horticulture

ATO-led programs Standing Taskforce Enhanced ATO

Taskforce - Facilitates whole-of-government information

Department of Human Services (DHS) Fair Work Ombudsman

Intelligence Commission (ACIC) Australian Federal Police

(AUSTRAC) Department of Jobs and Small Business (DJSB)

27 ATO-led programs Standing Taskforce Enhanced ATO enforcement Modelled on Serious Financial Crimes Taskforce - Facilitates whole-of-government information sharing Other Members: Department of Home Affairs (DHA) Department of Human Services (DHS) Fair Work Ombudsman (FWO) Australian Border Force (ABF) Australian Criminal Intelligence Commission (ACIC) Australian Federal Police (AFP) Australian Transactions Reports Analysis Centre (AUSTRAC) Department of Jobs and Small Business (DJSB) Treasury New audit strike teams Implement the hotline Improved analytics capability

28 In Summary: Our strategic blueprint We cannot solve our problems with the same thinking we used when we created them Address the drivers Employ smart technology Digitise business Follow the money Use existing architecture Leave an institutional footprint

29 Questions?

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