Shadow Economy Advisory Forum key messages 10 November 2021

Welcome and chair update

Co-chairs Deputy Commissioner Deborah Jenkins and Dr Michael Schaper opened the meeting at 10.00am AEDST and welcomed attendees. No conflicts of interest were declared, and members were reminded of confidentiality requirements.

Deborah advised she had returned to the Deputy Commissioner, Small Business role. She also advised the ATO is gradually recommencing paused case work, as lockdown restrictions are lifted and considering clients’ individual circumstances.

Agency updates

Assistant Commissioner, Peter Holt provided a general update to the group, including information about the most recent tax gap releases in the ATO annual report, and information about Director identification numberExternal Link and Super reforms – Your Future, Your Super that commenced on 1 November 2021.

Members were interested in the specific industries and behaviours driving the shadow economy component of the tax gaps. There was discussion about the role that regulatory complexity plays, and whether there are opportunities to leverage community mindedness and use small business benchmarks to help address shadow economy behaviour.

Vanessa Holben, Customs, provided an update from Australian Border Force (ABF), highlighting current and future work as borders re-open, addressing migrant worker exploitation, and joint work with the ATO on illicit alcohol and illicit tobacco.

Members suggested there was an opportunity to position the ABF as an ally to small business owners who are doing the right thing.

Geoff Francis, Treasury, provided an update on implementing a reporting regime for sharing economy platform providersExternal Link, Australian Business Number (ABN) reformsExternal Link and the review of the Commonwealth procurement rules, including statement of tax record.

An update was provided on the action item from last meeting about insecure work.

Action item	20211110-1
Due date	November 2021
Responsibility	Vanessa Holben and Bruce Billson
Action item details	There was discussion about positioning the work of the ABF as an ally for small business owners that are doing the right thing.

Analysis of ATO tip-offs – industry analysis update for members

Assistant Commissioner, Claire O’Neill provided an overview of the ATO’s Tax Integrity Centre (an initiative of the Black Economy Taskforce) which plays a vital role in capturing community intelligence. The presentation covered industry analysis of tip-offs, breakdown of tip-offs by entity type and case studies. Key points included:

• the Tax Integrity Centre receives around 50,000 community tip-offs each year
• around half of the tip-offs received are related to shadow economy behaviours, which includes undeclared cash transactions, unexplained wealth, illegal tobacco, alcohol and drugs, mistreatment of workers, phoenix and scheme promoters
• the ATO considers every tip-off received
• not all tip-offs are substantiated.

Members showed a keen interest in the community intelligence and discussed the impact of COVID-19 leading to a reduction in cash transactions accounting for a reduction in tip-offs about this behaviour. There was discussion about an increase in tip-offs related to employers being driven by heightened awareness due to stimulus measures such as JobKeeper and the Early Release of Superannuation. It was re-iterated that not all tip-offs are substantiated and are sometimes based on perception.

There was discussion about illicit tobacco sales in legitimate retail businesses, and whether a barcode-based tracking system could mitigate this (noting this was an original recommendation of the Black Economy Taskforce Final ReportExternal Link which was not progressed as government introduced a range of other measures to combat illicit tobacco). The issue of increasing expenses for small businesses (for example, merchant fees) potentially driving shadow economy behaviour was raised.

Action item	20211110-2
Due date	February 2022
Responsibility	Secretariat
Action item details	Community intelligence to be added as a standing agenda item at future meetings

Member updates

Members highlighted key shadow economy issues from their perspectives, including:

• a small number of players in the shadow economy are having a disproportionate impact suggesting this should be a strong focus of regulators
• drivers 'pushing' small businesses to participate in shadow economy – including increasing expenses, reducing margins, industrial relations changes, and COVID-19 restrictions (for example, some unvaccinated workers not permitted on premises are operating unregistered home-based hairdressing businesses)
• potential to leverage environmental, social and governance notions and incentivise good behaviour of ethically and socially conscious businesses
• promote digitisation so that advisors, and others have better visibility of client activities
• highlighting the risks to consumers as a potential strategy to reduce consumer demand for goods and services purchased through the shadow economy (for example warranties, credit history)
• continuing to reduce regulatory complexity with a suggestion that further examination of the impact of regulation on the shadow economy in Australia may be of benefit.

The effects of COVID-19 were also discussed, including:

• a COVID-19-driven reduction in cash use potentially resolving some shadow economy issues in various sectors for example. the restaurant and catering sector – noting that other behaviours including the use of sales suppression software will continue to be monitored
• the impact on benchmarks for small business – for example, some businesses are carrying additional stock as a safeguard against delivery delays. This, along with the decrease in cash takings, will have an impact on benchmarks.

Action item	20211110-3
Due date	February 2022
Responsibility	Peter Holt
Action item details	ATO to consider and explore appropriateness reliance on historical data for benchmarks, given the impact of COVID-19.

Shadow Economy Advisory Forum future focus topics

Dr Michael Schaper facilitated the discussion around future focus topics for the Shadow Economy Advisory Forum (SEAF) and developing an action plan. Three focus concepts were introduced:

• exploring 'trusted trader' type programs
• an industry-led strategy to raise awareness of the shadow economy and the harm it causes
• proactive sharing of insights to support good compliance.

Member discussion demonstrated:

• Strong support for increased messaging to raise awareness that the shadow economy is not a victimless crime. It causes harm to the community, consumers and small business owners and there is an expectation that regulators will take action against those operating in the shadow economy and support those that do the right thing.
• More work may be needed to explore ‘trusted trader’ programs, ensuring consistent use of terminology (as it is being used in different contexts with different meaning), and explore costs and benefits to government and small business – not all members were supportive of this broad concept.
• Potential gaps in information sharing regarding work already underway to address the shadow economy including marketing and communications and specific programs.
• A suggestion to engage the building and construction industry in this forum.

Deborah Jenkins offered separate meetings with members to explore the shadow economy challenges and opportunities in their own sectors.

Action item	20211110-4
Due date	February 2022
Responsibility	Co-chairs and ATO staff
Action item details	The Co-chairs and ATO staff to develop a plan out of session.

 

Action item	20211110-5
Due date	February 2022
Responsibility	Secretariat
Action item details	ATO to circulate program of work based on Black Economy Taskforce Recommendations and Government announcements since that time.

Other business

Future agenda items were noted, and the meeting was closed at 12.30pm AEDST.

Attendees

Attendees list

Organisation	Members
ATO	Deborah Jenkins (Co-chair), Small Business
ATO	Peter Holt, Small Business
ATO	Sarah Tuite (Secretariat), Small Business
Australian Border Force	Vanessa Holben
Australian Hairdressing Council	Sandy Chong
Australian Retailers Association	Paul Zahra
Australian Small Business and Family Enterprise Ombudsman	Bruce Billson
Chartered Accountants Australia and New Zealand	Susan Franks
Council of Small Business of Australia	Peter Strong
CPA Australia	Elinor Kasapidis
Independent	Michael Schaper (Co-chair)
Recruitment, Consulting and Staffing Association of Australia and New Zealand	Charles Cameron
Restaurant and Catering Industry Association	Wes Lambert
Treasury	Paul McCullough

Guest attendees

Guest attendees list

Organisation	Attendees
ATO	Claire O'Neill, Debt and Lodgment
ATO	Debra Goldfinch, Small Business
ATO	Luke McCarthy, Debt and Lodgment
Treasury	Geoff Francis

Summary of the key topics discussed at the Shadow Economy Advisory Forum meeting 10 November 2021.