Shadow Economy Advisory Forum key messages 15 August 2023

Key topics discussed at the Shadow Economy Advisory Forum 15 August 2023.

• Welcome
• Australian National Audit Office discussion
• What, how and why of eInvoicing
• Tax integrity centre – what the community told us
• Member updates
• Agency updates
• Other business

The Shadow Economy Advisory Forum (SEAF) co-chairs, Dr Michael Schaper and Belinda Darling, welcomed attendees and the Charter 2023–24 was tabled with no issues raised by members.

Australian National Audit Office discussion

The ATO and Treasury provided an update on the recent Australian National Audit Office (ANAO) report on the effectiveness of the implementation of the government response to the 2017 Taskforce report. The ANAO made 4 recommendations. The ATO and Treasury are working together to review the ATO – Treasury Protocol. Treasury are progressing work relating to the other recommendations, which includes producing a 5-year report into the shadow economy and the ATO will be supporting this work. Members discussed the role of this forum in providing input into the 5-year report. An update will be provided at the next meeting.

What, how and why of eInvoicing

Mark Stockwell, Director, ATO gave a presentation on eInvoicing which covered:

• an overview of eInvoicing
• as of 30 June 2023, 32,000 Australian businesses have registered
• invoice volumes issued through eInvoicing increased by over 500% to over 400,000 for 2022–23 year
• the drivers, benefits and challenges for adoption by the community
• future focus
• targeting key industries such as recruitment and construction retailers to increase use
• working across federal government to actively engage and onboard the top 50 suppliers.

Tax integrity centre – what the community told us

Shira Nahari, and Steve Verlingieri, Directors, ATO gave a presentation on the tax integrity centre (TIC) results which covered:

• an overview of the TIC
• trends observed and outcomes delivered under Shadow Economy Sharing Intelligence Program.

Member updates

Industry members shared key observations which focussed broadly on current environmental pressures. The discussion noted:

• Some industries are increasing their reliance on finance providers, with current interest rates only slightly lower than profit margins.
• Small businesses are impacted by the cost of employing staff, as compared to engaging contractors.
• Some small business owners are struggling to manage cash flow and pay their creditors and other debts, and this is leading to pressure on advisors to overstate deductions to offset changes to the low and middle income tax offset.
• Small businesses are increasing their engagement with external administrators and consultants. An increase in ‘untrustworthy advisors’ has been observed.

Agency updates

Paul Fischer, Acting Assistant Secretary, Treasury provided an update on the 2023–24 Budget measures:

• Tobacco excise rate changes
• Extension of compliance programs have been implemented (law changes were not required):
  • GST compliance program
  • Serious Financial Crime Taskforce
  • Personal Income Tax Compliance program
  • Tax Integrity – improving engagement with taxpayers to ensure timely payment of tax and superannuation liabilities.

Belinda Darling, Assistant Commissioner, ATO outlined the key achievements of the Shadow Economy Program for 2022–23:

• With additional program funding the ATO has been able to raise liabilities of $2.09 billion, with estimated cash collections of $1.22 billion.
• The Illicit Tobacco Taskforce continues to build on its success – 66 tonne of loose tobacco and more than 1.1 million cigarettes were seized during the year, equating to an estimated $110 million in excise.
• The Shadow Economy Taskforce made almost 100 disclosures to member agencies in line with the Memorandum of Understanding and Regulations.
• The ATO have supported small businesses through online learning and the Digital Cashflow coaching kit, with an ongoing investment in Youth, Culturally and Linguistically Diverse groups and Indigenous communities.

To support the future focus of the Shadow Economy Program strategy and design, a Shadow Economy qualitative research project is being undertaken to explore community perceptions, social beliefs and values that normalise and justify Shadow Economy behaviour. Results will be shared with this Forum.

Shadow Economy Program focus areas for the 2023–24 year:

• continue our work across agencies, including the Illicit Tobacco Taskforce
• continue our focus on
  • hidden wages
  • omitted income and outstanding lodgments
  • illicit alcohol
• continue to identify new and emerging risks using data and analytics and other intelligence, for example, from the community.

Other business

Suggested topics for future meetings were discussed:

• Sharing Economy Reporting Regime
• Tax Gap estimates, once finalised
• Shadow Economy qualitative research findings, 2024
• Annual Tax Integrity Centre update, 2024
• Third Party Data
• How we can identify signs of life/those operating outside the system through verifiable third-party data.