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Shining a light on the black economy
Shining a light on the black economy
Grant Wardell-Johnson, Lead Tax Partner, KPMG Economics & Tax Centre, assesses the scale of the untaxed economy and proposes some specific recommendations the government should consider to address it.
The last frontier
In 2017, the ATO published for the first time its estimate of the black economy’s contribution to the PAYG ‘income tax gap’, amounting to $2.08 billion for 2014-15.
Using a methodology employed by the Australian Bureau of Statistics (ABS), KPMG estimates the size of the country’s black economy as $32 billion per annum.
We believe the annual aggregate gap in terms of the GST on sales, PAYG tax on wages, plus income tax on businesses and on self-employed profits, would exceed $5 billion.
Key insights
In this report, KPMG unveils a series of proposals which could claw back untaxed income:
- Additional funding for coordinated enforcement action against serious tax crime.
- Two-stage amnesty for incorrect reporting, with subsequent higher penalties.
- Legislation to deny income tax deductions for cash payments.
- Strengthening evidentiary requirements for eligibility to obtain an Australian Business Number (ABN).
- Bringing the current ASIC company register up to date and review it for accuracy.
- Including a clean tax history as a requirement for participating in Commonwealth, state and local government tenders.
- Implementing a government ‘one stop shop’ for all necessary business and employer registrations.
- Making any cash transaction involving more than $10,000 illegal.
- Tying vendor rights to maintenance of invoice records and evidence of electronic payment.
- Government to support the Business Council of Australia (BCA) supplier payment code of conduct.
