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New fight against the black economy

The Chair of the Black Economy Taskforce, Mr Michael Andrew AO, today welcomed the Government’s release of the Black Economy Taskforce Interim Report and acceptance of early recommendations identified for action.

The report recommends an initial policy package to tackle the black economy, including 35 early ideas for further public consultation. The report is the result of an important partnership between government agencies and the private sector and is the first step in building a 21st century black economy strategy to halt this growing threat.

“Traditional enforcement approaches, which focus on symptoms rather than cures, will not fix this whole-of-government, whole-of-society problem. The Taskforce has found that the black economy is more than a tax problem, with no single solution. We are not alone in this; all OECD countries are grappling with this issue and are also developing new initiatives.” Mr Andrew said.

“The black economy undermines the fairness of our society by exploiting vulnerable workers, creating unfair competition for honest business and enabling the abuse of the welfare system. It also means honest people pay more taxes than they should have to because of those who don’t pay their share, it’s a dangerous dynamic. It’s not fair that those doing the right thing end up having to pay for those who cheat the system.”

“If left unchecked, black economy activities create a culture which legitimises and encourages further participation, so action needs to be taken now. Community attitudes are changing and there are strong views on maintaining the strength and fairness of our economic systems, recognising the long term damage that can come from tax avoidance and evasion and dishonest behaviour.”

The report identifies new vulnerabilities and emerging risks as a result of fundamental economic, social and technological changes. The high cost of tax and regulatory burdens on small business, technological changes, new business models and types of work (including the sharing economy) have been found to drive black economy activity. Complex interactions with illegal activities, the changing role of cash in our payment systems, exploitation of workers and more competitive commercial environments have also been identified.

“We’re seeing legitimate businesses lose contracts to others not playing by the rules and unfairly undercutting those who are doing the right thing. Workers are being underpaid and exploited, missing out on award wages and superannuation,” Mr Andrew said.

“Technologies like crypto-currencies and sales suppression software are making it easier to operate in the shadows. At the same time, technology can also help to combat the black economy, with the rise of tap’n’go payments, mobile technologies, biometrics and better data sharing among government agencies to reduce red tape and reduce compliance burdens for small business.”

“By working closely with business, government and community representatives we have developed an initial package of reforms. Better use of data, improving whole-of-government systems and information sharing are areas that we will investigate further. Developing better incentives and deterrents, encouraging opportunities for innovation, working with new payment systems and technologies and looking at education and cultural changes will also support this fight against the black economy, giving a fairer approach and level playing field for all.”

“I want to make it clear that this is a challenge for us all and the time to act is now. I will be continuing to consult widely with the community to inform our final report. Everyone has a role to play in combatting the black economy in Australia and as a first step I strongly encourage involvement in the next stage of consultation.”

The Taskforce is seeking public feedback on the Interim Report in preparation for a final report due to the Government, in October 2017.  Submissions can be made at www.treasury.gov.au/blackeconomy. The closing date for submissions is 30 June 2017.

The Chair will continue to consult widely with the community over the next few months, including roundtables and public meetings in capital cities and regional areas around Australia.