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Union calls for crackdown on sham contractors -

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ELEANOR HALL: The building industry union says hundreds of thousands of independent contractors are
not typical private company owners but rather are backpackers, international students, or
apprentices who are being paid as little as ten dollars an hour.

The Construction, Forestry, Mining and Energy Union says it's too easy to get an Australian
Business Number and it's called on the Rudd Government to tighten up the tax rules.

But groups representing the building industry say the tax rules are adequate -- it is just that
better enforcement is needed.

Finance reporter, Sue Lannin.

SUE LANNIN: There are nearly one million independent contractors in Australia, with the majority
either tradespeople or white collar professionals.

They are business people who sell their labour and use Australian Business Numbers, which were
brought in by the Howard Government.

But the Construction, Forestry, Mining and Energy Union says the system is being abused by some
employers who are making people to set themselves up as contractors to get a job.

John Sutton is the union's national secretary. He says it's too easy to get an ABN.

JOHN SUTTON: What we now see of course is backpackers with ABNs and international students with
ABNs and apprentices. There's a hell of a lot of apprentices in the building industries. Somehow
they're running businesses while they're an apprentice. It's a nonsense.

SUE LANNIN: How do you know that people are being exploited?

JOHN SUTTON: We see examples every week. Last week we had 150 Chinese on two Sydney building sites.
A lot of them were students and illegals and what not. Most of them spoke no English whatsoever.

How you can be running a bona fide business but you can't speak a word of English is pretty
strange. They were all being paid very low money, no superannuation, no worker's comp. I'd like to
say that's rare but it's not. It's very, very common for us to find these kinds of scams across the
building industry today.

SUE LANNIN: How many people are affected?

JOHN SUTTON: Huge numbers, we estimate that there's probably in the order of 300,000, when the
industry's booming it could be as high as 400,000 all under these bogus arrangements in building.
But then it's not just confined to building, it's in a whole range of other areas like security and
cleaning.

SUE LANNIN: The CFMEU wants the law changed to make it harder for people to become independent
contractors unless they satisfy certain rules. The law is being looked at by the Board of Taxation.

The Independent Contractors of Australia represents the industry and doesn't think the tax laws
should be changed.

Executive director, Ken Phillips, says the union's stance is political because it opposes
independent contractors on building sites.

KEN PHILLIPS: The law is very clear now. We've got several areas to go on. The CFMEU trying to
fiddle around with this law again is their old agenda of trying to use taxation purposes for their
industrial relations purposes.

SUE LANNIN: The Bureau of Statistics says more than one-third of contractors can't sub-contract and
don't have authority over their own work. The CFMEU says that's evidence they are employees.

Ken Phillips says there are problems with sham contracts but the answer is better law enforcement
not amendments. He says contractors who are being exploited can complain to the fair work
ombudsman.

KEN PHILLIPS: There's a strong possibility that there are large numbers, what those numbers are we
don't know. People who have got problems in the area need to go to the employee ombudsman, that's
what he's there to do.

He is investigating, he is robust in the investigations and they should be followed through.

SUE LANNIN: In its submission to the Board of Taxation, the Taxation Institute says the law could
be improved.

Dr Michael Dirkis is the Institute's senior tax counsel.

MICHAEL DIRKIS: We're limiting to the scope that the Government has given us the opportunity. We've
asked for a sort of clarification of the rules to try and get them to work a little bit more
simply.

SUE LANNIN: So is the Commonwealth losing tax revenue because of the system?

MICHAEL DIRKIS: The issue is the extent to which the Commonwealth and the states have actually
encouraged the growth in these sorts of contracting arrangements. So I think as a consequence of
those sorts of actions if people were all in employment then obviously the revenue mix would be
slightly different to what we're seing today.

ELEANOR HALL: That's Michael Dirkis from the Taxation Institute, ending that report by finance
reporter, Sue Lannin.