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  • Michael Hardy discusses the cash economy with David Koch - transcript

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    To watch the video of this transcript, refer to About the cash economy.

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    David Koch

    Let’s kick it off with tax. Michael, the focus for the tax office that you’ve been reminding us for a while now is the issue of the cash economy. First of all explain what the cash economy is.

    Michael Hardy

    Most simply it’s small business facing unfair competition, and the way it happens is that businesses try not to declare their income from their cash or their card or their online sales, they don’t pay the tax and that gives them an unfair advantage and that’s not fair on other businesses.

    David Koch

    So the businesses that pay the correct amount of tax, you know you get Joe Hockey, I won’t expect you to comment on Joe Hockey, but you get Joe Hockey screaming about a reduction in corporate profits or corporate revenues coming through, a lot of that can be corporates, companies and small businesses that aren’t reporting their tax and of course that’s one of the drivers for those who are paying the right amount of tax may even put pressure on them to pay more.

    Michael Hardy

    Well it’s certainly the case, I mean for everyone who’s not paying the right amount of tax, it puts pressure on honest taxpayers, honest businesses, honest you and I.

    David Koch

    Is the cash economy literally restricted to cash or is that sort of thing happening with electronic systems also?

    Michael Hardy

    Yeah, as I said, it is more than just cash, traditionally it was just physical cash, but we see people trying to hide income and not pay tax which is what it’s all about, with their card transactions, with online transactions. The same techniques are used to pick it up and we got the same ability to pick it up, it’s just not a smart way to go, it’s not fair.

    David Koch

    So what’s the tax office doing to make it fairer for everyone?

    Michael Hardy

    Well, fundamentally we’re changing about the way we work with small business, we’re standing shoulder to shoulder with small business to protect them from the unfair competition of those operating in the cash economy. We’ve got lots of services and we’re just I guess we are really repositioning to sort of stand with honest small businesses.

    David Koch

    Is it easier to get away with things as a smaller business than a larger one and it’s quite a good question, because you read about the big effort going into the top end of town and I suppose you see a lot of small business colleagues, other businesses that say 'oh you know we take a bit of cash, we’re too small for the tax office to really worry about', is that a bit of a myth?

    Michael Hardy

    Well there are differences. Big business issues and small business issues are quite different. I think that the problem is if you’re a small business and you’re not doing the right thing you’re being unfair to the other small businesses. So those other ones, the honest ones, they feel it. That’s not right.

    David Koch

    Right, right. But you have a monitoring service of other small businesses too. There’s no small business that’s too small not to have an eye cast over it, and your data, your computers, people probably don’t know that you have the most powerful computers basically in Australia. It flags businesses that might be below on certain criteria compared to the industry average doesn’t it?

    Michael Hardy

    Yeah, there are a couple of things we use. There are computerised risk models, we also use specific data matching, we get information from other agencies and from business suppliers and from the banks and other sources, we do compare businesses with all the other businesses of the same size, same industry, with the small business benchmarks and we take information in from the community as well.

    David Koch

    Right, ok. If you do know of a business doing it for cash, can you dob them in? Sounds almost un-Australian but the thing is, you know we end up paying for it, the people who do pay their tax.

    Michael Hardy

    Well it’s not really dobbing when you think about it because you 'don’t dob in your mates', well if someone is cheating the system, they’re probably not your mate. It’s more like asking the referee, can you have a look at that, can you make sure they’re back playing by the rules and so yeah absolutely let us know, we’ll take a look.

    David Koch

    Ok, alright so you just email or ring the hotline?

    Michael Hardy

    The easiest way is to go to our website, it has been revamped and has a fresher appearance. Just put in 'tax evasion' and it’ll actually take you to a form, it’s anonymous, where you can put the details in that you’ve got some concerns with a business, can you take a look.

    David Koch

    Thank you to Derek, Mel and Michael. Really appreciate your time today.

      Last modified: 12 Feb 2014QC 38514