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Thursday, 13 September 2018
Page: 6342

Senator HUME (VictoriaDeputy Government Whip in the Senate) (13:33): I rise today to speak in favour of the Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018. As the chamber is well aware, the Morrison coalition government has been taking decisive action in the fight against the black economy for a number of years now. The black economy, as we know, undermines community trust in the tax system and gives some businesses an unfair competitive advantage. It puts unnecessary and undue pressure on the margins of honest businesses and often includes the exploitation of vulnerable employees through the underpayment of wages and the loss of entitlements.

The reforms outlined in the legislation we are speaking about today in this chamber follow recommendations made by the Black Economy Taskforce. The Black Economy Taskforce was put together some months ago. It had very broad consultations and has finally reported to government. It will be followed up with a comprehensive suite of supporting measures which build on a number of existing significant tax integrity measures that have already been outlined by the former Minister for Revenue and Financial Services, the Hon. Kelly O'Dwyer MP. She established that task force a long time ago—I think it was back in December 2016—to examine exactly how best to crack down on illegal black economy activity. It was a multi-agency black economy standing task force. It undertook a cross-agency approach to combating the black economy, with more effective exchanges of information to develop increased intelligence, and it was equipped to identify and prosecute the most egregious cases of black economy activity.

As the chamber may recall, additional funding was provided to the Australian Taxation Office, the ATO, at the time to expand its data analytics and data-matching capabilities and to allow a much better leveraging of community through the introduction of a hotline. The hotline was for reporting black economy and illegal phoenixing activity. It was a significant breakthrough, that new capability. It was supported by an enhanced enforcement strategy, including mobile strike teams to break up illegal behaviour as it was identified.

You may recall, Acting Deputy President McCarthy, that there was a story discussed in the media and also reiterated at the economics estimates committee about how Commissioner Jordan had charged a group from the Black Economy Taskforce to go out and speak to traders at one of the markets in Victoria—it was the Queen Victoria Market, if I remember rightly. It wasn't supposed to be a confrontational experience; it was supposed to be helping some of those traders that tend to be associated with black economy activity. It gave them a heads-up. They said, 'On Thursday there will be members of the ATO coming to help you and talking to you about your businesses and how best you can report to them more transparently, more openly and more accurately.' Interestingly, the story goes that when the members of the ATO, the friendly faces of the Australian tax office, turned up to the market on that day—as prescribed, as warned—it was amazing how many traders were unwell and had their shutters drawn.

I think that while it's obvious the black economy is something that's used for egregious purposes it can also be used mistakenly in these cash economies. But it does cost: it costs the taxpayer, businesses and workers millions and millions of dollars every single year. So it's important to tackle it and to tackle it seriously. I'm very proud to be part of a government that has done exactly that. It's not a new problem; a black economy has existed since time immemorial—since taxes began to be charged people have tried to avoid them. But it is important, and this government recognises the importance of not just taxing people but also ensuring that they pay a fair amount of tax—that everybody should pay their fair amount of tax.

It is important that this particular issue, the black economy, has been tackled in a very systematic, a very professional and a very thorough manner. The Black Economy Taskforce should be commended for the work that they've done—as should, dare I say it, the former Minister for Revenue and Financial Services, Kelly O'Dwyer, who has now moved portfolios to take on issues of industrial relations. But she has certainly left a legacy behind her in this particular space.

When we think about the cost of the black economy to the Australian economy as a whole we can only think about what we could spend the money raised in tax revenue on that we are now foregoing because of the existence of the black economy. What could we spend that money on?

What could we implement that would benefit the Australian population as a whole if the appropriate amount of tax was paid by those who are currently avoiding it? Things like new hospitals. Things like new energy solutions. What about pension payments? What about putting more drugs on the PBS? There are so many things that we could do, with appropriate amounts of tax paid, in the form of distributions, which is why it is so important.

Everybody attending the chamber today knows that they have to pay their taxes at the end of the day. It's part of our civic duty. It's part of our moral duty. To avoid it, to partake in the black economy, denies your fellow man, all other Australians, access to better services and a stronger economy. As you may well recall, the government responded to the Black Economy Taskforce interim report as part of the 2017 budget delivered by then Treasurer Scott Morrison, now Prime Minister Scott Morrison. The government announced the measures to address the growing economic and social problems associated with the black economy, banning the manufacture, distribution, possession, sale and use of sales suppression technology in particular. This is technology that allows businesses to conceal what income it is that they are earning. Remember the old days, when we used to have the system of two books? It's similar to that; it's a technological version of the two books.

This bill also extends the taxable payments reporting system to two industries that present tax compliance risks, cleaning and couriers, to ensure that payments made by businesses to contractors in these particular industries are reported to the Australian Taxation Office. This bill that we have before us today delivers on those particular 2017-18 budget decisions. The measures in the bill form only one part of a much broader suite of reforms that the government is progressing through its response to the Black Economy Taskforce final report. The Black Economy Taskforce has been working now for nearly two years to put together its thorough recommendations.

I think we should go into a little bit more detail on the first schedule of this legislation. This schedule creates a new offence for the manufacture, distribution, possession, sale and use of electronic sales suppression tools for the purposes of not disclosing business income. There is, it is important to note, no legitimate reason to produce, distribute, possess, sell or use these particular electronic tools. They actively remove transactions from electronic record keeping systems and they change transactions to reduce the amount of each sale. Essentially, it's falsifying records. They can modify things like GST taxable sales to GST non-taxable sales. In all instances, no audit trail of those changes exists.

There is no reason to have this particular software or these particular tools unless you are actively avoiding tax. It's not enough to just ban the sale or the use of them; it's also important to ban their manufacture and distribution. The government is introducing a number of offences that are subject to strict liability and very heavy penalties to deter the use of such technology across the software supply chain. Because that technology is used solely for the purposes of tax evasion, the new offences will restore a level of integrity to our tax system.

Recent reports from the OECD have highlighted that this particular software is spreading globally. Its use has been identified in a number of jurisdictions, including Canada, the USA, Germany and Sweden. Obviously the black economy is a problem that pervades not only the Australian economy but also the global economy. Many of those countries where this particular software or these electronic suppression tools have originated or proliferated have already implemented measures to address that risk. This legislation simply brings Australia into line with our global counterparts. The ATO has uncovered a considerable number of incidents already where this software has been in operation in Australia. That's schedule 1 of this legislation.

Schedule 2 is in respect of third-party reporting. From 1 July this year, businesses in both the courier and cleaning industries will be required to give an annual report to the ATO, the Australian Taxation Office, regarding the payments they make to businesses for them to provide courier and cleaning services. This particular reporting obligation will apply from the 2018-19 income tax year and reports will be required by 28 August 2019. The measure is estimated to result in a gain in tax receipts of $132 million over the forward estimates period—the four years of the forward estimates. That's $132 million. It's a very significant tax revenue increase from one measure alone.

Business-to-business payments for courier and cleaning services are within scope. Clearly, these industries have been targeted for black economy activities. Implementation of the tax payments reporting system in the building and construction industry has resulted in improved contractor tax compliance and reporting of income. The government has also decided to extend this reporting system to other high-risk industries. The Australian Taxation Office has prepared significant and detailed guidance material to assist businesses in those sectors, the courier and cleaning industries, to comply with their reporting requirements. The information reported to the ATO is then used for the pre-filling of tax forms or activity statements, which should make it much easier for contractors to lodge their income tax returns and also for data-matching purposes to ensure that contractors comply with their tax obligations, such as correctly lodging their income tax returns and also their BAS obligations.

As you can see, the government has acted on the concerns raised by many, many stakeholders that mixed businesses providing those courier or cleaning services may have a disproportionate compliance burden where the provision of those services is merely a small part of the overall activity of the business. The introduction of this threshold test will mean that businesses that receive payments for courier or cleaning services that are less than 10 per cent of the business's overall GST turnover for the reporting period will, in fact, be exempt from the reporting payments they make to contractors commissioned to complete these services. The Commissioner of Taxation, Commissioner Jordan, may, through legislative instrument, amend or alter the threshold test in response to a change in compliance risks or compliance burden identified in these industries. Any alteration to the threshold test would be subject to parliamentary scrutiny. The Australian Taxation Office will also publish guidance material to assist those businesses providing courier or cleaning services to determine when they need to report.

I think you can see, Acting Deputy President, this new approach, which is boosting our capabilities to tackle the black economy, will deliver a targeted, stronger and far more visible enforcement, and it will demonstrate the very, very real consequences of participating in the black economy.

There are other aspects of tax reform that have been tackled under the umbrella, I suppose, of the Black Economy Taskforce. One of them which I want to touch on, although it is not necessarily directly pertinent to this piece of legislation, is the new measures that this government has introduced to tackle illicit tobacco. The illicit tobacco market is one of the barnacles of the black economy. It seems to rear its ugly head over and over again. The problem with illicit tobacco is it's inexorably intertwined also with the flow of funds to organised crime syndicates. It's important to tackle it not just for its own sake but also as a crime prevention strategy.

The previous Minister for Revenue and Financial Services, Kelly O'Dwyer, put together a new multiagency Illicit Tobacco Taskforce which comprised members of law enforcement, border security agencies and the ATO to deliver a multifaceted approach that leveraged the whole-of-government capabilities and powers to proactively target, disrupt and prosecute organised crime groups at the centre of the illicit tobacco trade.

The government has introduced an economy-wide cash payment limit of $10,000 applying to payments made to businesses for goods and services, and that will apply from 1 July 2019. That cash payment limit captures high-value transactions and helps stamp out opportunities for criminals to launder the proceeds of crime into goods and services or for businesses to hide transactions that reduce their tax liabilities.

As you can see, there are a number of aspects to tackling the scourge of the black economy: the Black Economy Taskforce and the legislation that we are considering today are just one piece of the puzzle. There is more to do. However, the government thanks the Black Economy Taskforce in particular, which was led by Michael Andrew AO, as well as the stakeholders who participated in that very broad, detailed and thorough consultation process.

The aim of the game for the government, of course, in its response to the Black Economy Taskforce's final report, is to improve fairness for businesses to ensure there is a level playing field and to continue to strengthen the integrity of our tax system. Fairness isn't all about everybody paying the same thing and receiving the same thing; fairness is about paying what you owe and not avoiding paying what you owe.

As a very proud member of the coalition, I say we should all be very pleased with the work that the previous Minister for Revenue and Financial Services, the Hon. Kelly O'Dwyer, has done in this space. It's fantastic to be part of a government that has tackled one of the most difficult issues in our economy, a scourge on our economy, for many decades.