John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

In accordance with the provisions of the Auditor-General Act 1997, I present the following report of the Auditor-General: Audit report No. 30 of 2005-06: Performance Audit—The ATO’s strategies to address the cash economy: Australian Taxation Office.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

by leave—I move:

That the Senate take note of the document.

Report No. 30 of 2005-06 is yet another important report by the Australian National Audit Office. As I have said on a number of other occasions, thank goodness for the Audit Office. For all of those people listening to the broadcast of this debate, I note that the Audit Office is a statutory independent office responsible for the detailed oversight—auditing—of government departments, instrumentalities, programs and the like. It is important because it is independent and fearless in its examination of instrumentalities and programs. Against a backdrop of declining standards of governance in this country, as practised by this government, the Audit Office becomes one of our last bastions for ensuring independent and effective scrutiny of the activities of government and its instrumentalities—in this case, the Australian Taxation Office.

The Audit Office has highlighted a number of issues in respect of the tax office’s collection of what is called the taxation that accrues from the cash economy. It is interesting to note that the Audit Office outlines how in fact we measure and estimate the value of the cash economy—and, by definition, the cash economy would be hard to value. It refers to the lower end range of estimates made by the Australian Bureau of Statistics in 2003, which estimated that the cash economy represented about two per cent of gross domestic product, which it thought understated it. Translating that into a dollar figure gives a value of the cash economy in 2001-02 of about $13.4 billion—so it would be likely to be much higher today—on which taxation is not paid.

I smiled a little at the opening comment in paragraph 1.3 of the report, which stated, I thought rather boldly, that ‘the use of cash is not illegal’. I am glad that it is not! They point out:

... what is illegal is the non-declaration of cash income or the misstatement of expenses for tax purposes that is facilitated by cash transactions without proper receipts and other documentation.

I am glad to hear that the use of cash is not illegal in Australia—at least not yet. But it is a serious issue. I cast my mind back to the debate we had in respect of the introduction of the goods and services tax in this country. I am sure people would remember that this was defined, from the Liberal government’s point of view, as the reform that was aimed at fixing a broken tax system. One of the issues that was debated at that time was the cash economy. It was argued by the Liberal government that a goods and services tax would at least partly fix the revenue gap or hole that was a consequence of the cash economy.

What is interesting by way of background regarding the identification of the size of our cash economy is that it has actually grown with the GST. It has not shrunk. I find that unsurprising, frankly. If you think about the GST, it is not surprising that the cash economy has grown, yet this was seriously advanced by the Liberal government as one of the reasons for introducing a GST in this country. They also claimed that the tax system was broken and that income tax and company tax were not going to be able to sustain future government expenditure. That was another absurd claim made at the time that the GST was introduced. What do we have today? We have record collections of income and company tax. So the old tax system was not broken; that was simply a con job by the government, massively promoted at taxpayers’ expense, to convince the electorate to support the introduction of a GST.

Coming back to the cash economy, it is important that the tax office is vigilant in this area in order to ensure that the at least $13.4 billion—considerably higher than that now—is available for tax purposes. The Audit Office made five or six recommendations in respect of the tax office improving its approach to collecting and maximising the tax revenue from the cash economy. I have only had about 10 minutes to read the report but it does not appear to identify what I would call significant failings by the tax office. There are a number of recommendations that I am pleased to see that the tax office has accepted in order to improve compliance activity and tax collection in this area. The report indicates:

Over the past three years the chances of businesses in cash economy industries being reviewed by the ATO has increased. The cash economy teams—

and there are specific teams—

have contacted over 123 000 businesses where cash trading is prevalent and this has led to extra tax of over $352 million being assessed. Many of these businesses were assisted to keep better records making it easier to meet their obligations.

I referred there to cash economy industries. The report does identify a number of industries which are more susceptible to cash economy transactions. These include—and this would not come as a surprise to anyone who is listening—businesses such as hotels, clubs, the construction industry, restaurants, cafes and takeaways. They are just some of the industries that are identified as cash economy industries. Table 3.2 is a useful table which lists the number of cases and revenue adjustments from cash economy projects in 2004-05. For example, in hotels and clubs there was a revenue adjustment of some $27 million, with the number of cases finalised being over 5,200. That is a lot of intensive casework. That is just illustrative. In property and construction there were some 13,700 cases, and in restaurants, cafes and takeaways there were over 10,000 cases, with the revenue breakdown collected.

Overall, it appears that the Audit Office are satisfied with the activities of the ATO in this area. There could be some room for improvement in some six areas, but the ATO has accepted the recommendations of the Audit Office. As I said, by general standards this is not too bad a report in terms of any shortcomings or failings identified by the Audit Office. I have had occasion to speak on a number of other Audit Office reports over the last few years, and I would have to say that this is one of the more benign reports in terms of activities, failings or problems that are identified. There have been far worse reports. I think amongst the worst was the Audit Office report into defence equipment, which identified that there was some $5.9 billion in defence department equipment missing. That was amongst the worst reports.

With those few words about this report, I conclude my remarks by saying that the Audit Office performs a very important role. I know it does not get a lot of public attention, but it has an independent statutory oversight. I only wish it had got into that Wheat Board a bit earlier. It is pity that the Audit Office did not have a hard look at the Wheat Board and some of the activities there. I seek leave to continue my remarks later.

Leave granted; debate adjourned.