ALI MOORE:
Kelly O'Dwyer, good morning.
KELLY O'DWYER:
Good morning. I am in a car travelling. So we must have had hit a black spot, I am sorry about that.
ALI MOORE:
That excellent internet service that we have in this country. So how do you stop the black economy?
KELLY O'DWYER:
We think it is critically important to actually crack down on this, because nothing makes fair-minded Australians angrier than having to pay more tax as a result of someone else not paying the tax that they are supposed to pay. And that's why we are looking at this issue that you mentioned in your introduction as how sizable it is in relation to our Gross Domestic Product – around about $21 billion. If we get a percentage of that, that's billions of dollars. Billions of dollars to our hospitals, to our schools, to other much needed services. And so that's why we've formed this Taskforce, this Black Economy Taskforce, that, for the very first time, will be a whole of government Taskforce, which will include the ATO, the Reserve Bank, it will include departments like Human Services and Immigration as well. Because there is a number of people that are committing fraud on the Australian people in two ways: welfare fraud and also tax fraud.
ALI MOORE:
How do you know exactly how big it is? How do we know it is 21 billion?
KELLY O'DWYER:
The Australian Bureau of Statistics has actually come up with this figure. We don't know if it's perfect, but it's a good estimate of the size of the economy that effectively is outside of the economy. So it is considered the black economy, where we are not getting revenue for the amount of money that is being traded or being earned. So we can't say specifically how much we are missing out on. But that is again part of the reason why we have formed this Taskforce. It is critical that we actually know and close down that loophole and that's why, as I said, AUSTRAC, APRA, the Reserve Bank of Australia, they're all going to be involved in this Taskforce. Because we need to uphold the integrity of our taxation system and this is a critical part of it.
ALI MOORE:
There is, I suppose, two sides of that, isn't there? There is the integrity of the taxation system, but a lot of people might sit there and say well actually, you know, swings and roundabouts, look at some of the multinationals that seem to do an excellent job of not paying their fair share and would be a few billions in that direction.
KELLY O'DWYER:
Well absolutely and that exactly why the Turnbull Government has focused first on multinational corporations in closing loopholes down on them, on those that engage in tax avoidance. We have strengthened the powers of the Australian Taxation Office, we have double penalties on large companies that are ripping off the Australian taxpayer. We put in place a world leading law, the Multination Anti-Avoidance Law, that started on the first of January this year. We will see cases come before the courts by the middle of next year as a result of those changes and there are very significant audits happening now of multinationals. Because you are quite right, integrity of the taxation system is, you know, from the top of the tree, right down to the bottom of the tree.
ALI MOORE:
So Minister can we just stay with the big end of town for a minute. We have some numbers from the ATO, the tax office, just last week and they show that more than a third of big public and private companies, we're talking over $100 million income, paid no tax in 2014/15. So that won't happen under the changes you have introduced?
KELLY O'DWYER:
So they're the tax figures that happened in the year before our changes in legislation. Now there are some reasons as to why companies don't pay tax. Say they might have had a particularly bad year and suffered losses which is why they don't actually pay the same amount of tax they would otherwise be paying. But certainly our changes will have a very significant impact on particularly those big multinationals. And there are a number that have already publically outed themselves in terms of actually changing the way they are structured such as the Googles of this world and in doing that, fit in with our new laws which give the ATO increased power to raise assessment against these types of taxpayers so that the ordinary Australian citizen is better off as a result because everyone is paying the right amount of tax.
ALI MOORE:
It will be fascinating to see what happens to those numbers that we saw for 2014/15 when we look at those numbers for 17/18 for example. But let's go back now to, I guess, the other end of the taxpayer, the smaller tax payer. The $100 bill, the fact that there are three times as many of them in circulation as $5, I don't know about you – maybe you work in a different sphere to me – but I don't see them very often.
KELLY O'DWYER:
I don't see them either.
ALI MOORE:
So where are they and what do you read into that?
KELLY O'DWYER:
Well this is the interesting question isn't it? That, at a time that we have got increasing electronic payments, and I think basically anybody under the age of 40 doesn't really tend to carry around terribly much cash these days, they all use their cards to tap and go – even for a coffee. At a time that people are increasingly using these electronic payment systems we seeing an increased number of $100 dollar notes circulating. The big question is why? We have tasked this Black Economy Taskforce, headed up by Michael Andrew, who is an expert in tax, we have tasked them to look at this particular question because it does raise, I think, a number of issues.
ALI MOORE:
So why the $100 note though? Why would that – let's say the decision is to withdraw, why would that make a difference? Is it about the ease of transport of cash?
KELLY O'DWYER:
We are not saying that we are going to be withdrawing the $100 note and I think that I should say that from the outset.
ALI MOORE:
So it's under consideration, isn't it?
KELLY O'DWYER:
We've tasked the Taskforce with actually looking at all the issues that are relevant for the Government to consider in actually making sure we actually close down loopholes and we can reduce and eliminate welfare fraud, we can level the playing field, we can reduce and eliminate money laundering opportunities and criminal activities. And this may well be something they consider. I am not going to reduce the scope of what it is that they can consider and I am not going to get into hypotheticals about what the Government will or won't accept from the Taskforce. What we are saying is there are international experiences around limiting payments amounts that you can make in cash for instance, such as in France where they have limited the payments – cash payments – they have made for good or services, to around about €1,000. They have done that to try and address some of these sorts of issues. Now, the tax Taskforce, the Black Economy Taskforce, will consider these sorts of questions and make the very best recommendations to Government about what it is about that we need to consider in the Australian context.
ALI MOORE:
The one thing thought that you would have to, sort of, at least consider at this point, and I take your point that the purview is open before the enquiry, if you like, and there is nothing off the table, but there is nothing necessarily definitely going to happen. But if you look at, for example, India, they tried to reduce the stashes of hidden money in that economy but scraping 500 and 1,000 Rupee notes and it's been an absolute disaster. They did it overnight and no one can replace their currency and the whole system is falling apart. Can you do it? Can you remove a big denomination note smoothly?
KELLY O'DWYER:
Well I think it is very, very challenging and that's exactly why you have experts looking at these sorts of questions. But as I said, it's certainly not limited to looking at this particular question, in fact, far from it. It's looking at the broader international experience as well. We have seen certain pilot schemes that we have run in Australia that have worked before, where there has been additional reportage in the construction sector which has led to increased revenue for the Government. We are not saying cash is wrong, far from it, I mean there are a number of people who make cash payments and who declare it. There is nothing wrong with that at all. It's the issue where people don't declare it, where someone is for instance doing some cash-in-hand work and not declaring it to the Government and at the same time also taking a welfare payment from the Government and they are dudding the Australian taxpayer in two ways: one, because they are taking a welfare payment that they are not entitled to; and two, because they are not paying any tax on their income that they are earning.
ALI MOORE:
And there is the Kerry Packer defence that you don't do such a great job spending it but why would I pay even more. But I suppose that's another argument all together.
KELLY O'DWYER:
I think that's a separate issue.
ALI MOORE:
Sure. Is there a problem though, Minster, that the electronic payment system which is where people are moving to is just not that efficient? You know, you can transfer money on a Monday night but it doesn't turn up until a Wednesday morning.
KELLY O'DWYER:
These are all issues that technology is looking to solve and that there are systems, more portable as well, where people can actually have their accounts between different banks and being able to shift between banks, these are questions that were recently considered by the House Standing Committee on Economics, increased competition which lead to increased innovation in many respects. So these are all good things for the customer and the end of the day. But our duty, as a government, is to make sure that we have a tax system that people can have confidence in, that has integrity, that means that people aren't paying higher taxes that they otherwise need to, because there are some people who aren't paying any.
ALI MOORE:
It's coming up to a quarter to nine on 774 ABC Melbourne and you are listening to the Minster for Revenue and Financial Services, Kelly O'Dwyer. Minister just a couple of quick other issues, the big one coming up ahead of the mid-year economic review next week – Australia's triple A credit rating. What do you reckon the chances are that we are going to keep it?
KELLY O'DWYER:
Well I'm not going to speculate on our triple A credit rating other than to say the Government is obviously very focused on getting our budget back in the black. We inherited a very difficult position from the previous Labor Government. We left them with great surpluses when we left government and we inherited, you know, huge deficits, and unfortunately we are currently paying interest bills on something like $12 billion every year, which is completely and utterly wasted money. Which mean we have to cut back on expenditure and we have to also make sure we get the revenue that is owed to the Australian people through the door which is part of the reason that we are looking at these sorts of issues around the black economy.
ALI MOORE:
None of that happens fast though and the triple A rating is in danger right now. You would have to say the chances of keeping it are low, wouldn't you?
KELLY O'DWYER:
I'm not going to enter into commentary on that, others are much more expert in being able to enter into commentary. But what I would say is that it is absolutely incumbent upon all levels of Government and the Opposition to actually be responsible in doing the right thing in making sure they act in the national interest, in helping to cut expenditure that we cannot afford right now in the current budget situation and it's incumbent upon them to actually work with us in the national interest. We're very happy to work with them. We were able to do that with the Omnibus Savings Bill but unfortunately that seems to have been where it has ended and the Labor Opposition has a lot to answer for when it comes to the position that was inherited by the Government and also their frustration of our measures to try and actually help fix it.
ALI MOORE:
Kelly O'Dwyer I know you have to go but just a final issue. We are going to be talking to the tax office a little later in the program, the fact their online system was down for two business days, apparently a world first glitch. Speculation is they've lost quite a bit of data. Extraordinary?
KELLY O'DWYER:
My understanding and the advice from the ATO is that no data has been lost and that it is a hardware issue that they have been dealing with. Obviously it's put a lot of people – it's inconvenienced a lot of people and that is a very, very unfortunate thing and I'm sure that when they come on they will apologise for that but it is rectified in that the ATO website is now up. It doesn't have full functionality at the moment but I am advised that by the end of today it should have full functionality.
ALI MOORE:
Not good enough?
KELLY O'DWYER:
Not good enough and I think they'd be the first to admit that. And that's why they're actually working through the issues as we speak to make sure that it doesn't occur again.
ALI MOORE:
Alright Minister thank you very much, I really appreciate your time this morning.
KELLY O'DWYER:
Great pleasure, thanks Ali.