Shadow Economy Advisory Forum key messages 8 February 2022

Welcome and chair update

Co-chairs Deputy Commissioner Deborah Jenkins and Dr Michael Schaper welcomed attendees. No conflicts of interest were declared, and members were reminded of confidentiality requirements.

Deborah Jenkins advised that government announced an extension to shadow economy compliance funding for 12 months to June 2023, at mid-year economic and fiscal outlook in December.

Industry led messaging approach and plan

Members discussed benefits of industry leaders speaking up and sharing stories to shift and normalise the desired small business culture, using behavioural insights, industry associations and networks to dispel inaccurate messages the group would like to address.

Key messages

Encourage people to take personal responsibility (whether as a consumer, employee, or business owner/manager).

Good business pays, for example, those businesses in the system were eligible for government support during COVID-19, while those in the shadow economy were not.

Director identification number and phoenix

The ATO provided an update on the recent changes to director identification number (director ID) and how this will assist in identifying phoenix activity. Members discussed the messaging to directors and were interested in examples of how the ATO will use the director ID. Members expressed an interest in obtaining additional information to share with industry associations and members.

Agency updates

Assistant Commissioner, Peter Holt, ATO advised:

• The ATO continue conversations to consider the impact of COVID-19 and how it may shape the benchmarks in the future.

Geoff Francis, Treasury advised:

• Work is progressing on the sharing economy and ABN reform.

Vanessa Holben, Customs, Australian Border Force advised:

• A digital passenger declaration card is being introduced to coincide with the borders opening on 21 February 2022.

Member updates

Members highlighted key shadow economy issues, and the effects of COVID-19 from their perspectives including:

• Some COVID-19 orders are having unintended impacts. For example, vaccination mandates may see unvaccinated business owners/ staff migrating to the shadow economy when they are unable to return to their workplace but there is still demand for their services.
• Another two years of disruption is expected for small businesses.
• Some businesses are moving away from using professional advisors when they need them the most, for a range of reasons, including cost.
• The end of many deferred liabilities from previous periods is coming up in March 2022, for example commercial rent relief, loans deferrals and taxes deferred due to COVID-19 impacts.
• Importance of recognising that not all businesses are struggling due to COVID-19, some are doing well.
• Some zombie businesses are holding out in expectation of more government assistance.
• In some industries turnover is down as much as 40% this year.
• Some businesses undervalue their work by offering a discount for cash – discussion about the impact of such discounts.
• Currently consumer behaviour may be highly unpredictable as is COVID-19.
• Not having a single set of rules between state government COVID-19 systems can create complexity to the integrity of data.

Shadow economy issues including:

• The shadow economy does not occur in isolation, it is widespread across a range of tax (and non-tax) obligations.
• Delays across the supply chain are causing financial stress for many businesses.
• Building sector is still a significant source of shadow economy activity.
• Anecdotally cash remains prevalent in many regional areas.
• Is at odds with some of the media reports.
• Closure of banks outlets regionally is having detrimental effect.
• A lot of cash in circulation is getting harder to manage.

Other business

Suggestion from members to invite a guest speaker to the meeting to discuss international examples of the shadow economy. ATO noted significant discussions happen globally and information exchange occurs through the Organisation for Economic Co-operation and Development Shadow Economy Community of Interest.

Attendees

Guest attendees