Shining a light on the black economy | KPMG | AU

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.

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Lead Tax Partner, KPMG Economics & Tax Centre

KPMG Australia

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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.

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