Alan Jones:
Thirteen to eight. Look we've heard a lot about this black economy. It's defined by the Federal Treasury as people who operate entirely outside the tax and regulatory system or who are known to the authorities but don't correctly report their tax obligations. We all object to that because those who don't pay tax are being underwritten and subsidised by those who do.
It involves practices including the understatement of takings. That is, I suppose we joke don't we, put fifty bucks in the till and ten bucks under the till. The payment and acceptance of cash off the books and of course welfare fraud. The black economy in Australia they say is worth fifty billion dollars and the Federal Government recently announced plans for a crackdown. Under it, businesses, we were told, will face criminal and civil penalties if they make or accept cash payments greater than $10,000.
Now I'll talk to Michael Sukkar about that in a moment. But there is an exposure draft for the proposed quote "restrictions on the use of cash" laws and it outlines fines of more than $25,000 and possible prison sentences of two years for business owners who knowingly accept or pay large transactions in cash. This is down the track after January 1 2020.
Michael Sukkar is the Assistant Federal Treasurer, Victorian, a good one, Minister for Housing. He says the Government is quote "committed to continually ensuring our financial system is hardened against criminals and terrorists without placing undue burden on industry". He is right here beside me, Michael Sukkar good morning.
Michael Sukkar:
Good morning Alan.
Alan Jones:
Thank you for your time. I don't understand this. Does this mean that you paint my front fence and it's $4,600 and it's ok for me to pay you in cash and not pay tax?
Michael Sukkar:
Well no. So this recommendation came out of the Black Economy Taskforce which found that particularly criminal gangs were using large cash transactions to convert their ill-gotten gains or effectively to launder them into jewellery, cash and houses in some cases, by purchasing them with cash. Many jurisdictions around the world have moved to limit cash transactions. Ours is at $10,000 - much higher than many other jurisdictions.
We consulted with small business and small businesses said look, the vast bulk of them don't ever really deal in transactions…[inaudible]
Alan Jones:
What if the lady comes in and does the cleaning for you, one day a week. And it's a hundred and fifty bucks or something or three hundred bucks, and it's ok. Are you saying, as a Government, it's ok for that to paid in cash?
Michael Sukkar:
Of course, absolutely.
Alan Jones:
No tax?
Michael Sukkar:
Not no cash. I mean cash is legal tender. The cleaner in that case would be required to report that income as income.
Alan Jones:
But you don't know if the cleaner has or hasn't.
Michael Sukkar:
This is why, you know, cash can be a big problem in the black economy. Because obviously it sits outside of reporting structures that are electronic. I mean there are a whole range…
Alan Jones:
Is there a day coming where we won't actually be negotiating in cash?
Michael Sukkar:
Look, I suspect, if that ever occurred it would be a long way into the future. I mean, cash is legal tender. The obligation on small businesses is to report cash just as they would report an EFTPOS transaction or any other.
One of the things the Black Economy Taskforce found and the ATO recently found, is that small business in particular have essentially a ninety percent compliance rate. Ninety percent of small businesses who contribute seventy six billion dollars, report every dollar of income whether it is in cash or any other form.
Alan Jones:
You're concerned with criminal activity. Just to give, a whole heap of information has been provided to you as Assistant Treasurer – just a simple example of the kind criminal activity you're trying to nip in the bud.
Michael Sukkar:
Well bikie gangs particularly who are involved in the supply and trade of illegal drugs. They convert the cash from those activities into assets - essentially launder them into jewellery, cash and some cases houses - is what the Black Economy Taskforce found.
Alan Jones:
And how do you track that down?
Michael Sukkar:
Well this is the point, it's very hard to track down cash transactions that occur, that convert cash into those assets. Which is why we are saying a $10,000 limit. And that gives us the ability to really tighten down on those criminal gangs because they won't be able to convert, in some cases, hundreds of thousands if not millions of dollars.
Alan Jones:
But they will, they won't take notice of you.
Michael Sukkar:
Well it will give our agencies a much better ability to chase them because you're not converting the cash as easily as you were previously.
Alan Jones:
But when they buy the jewellery what record exists that they bought the jewellery or…?
Michael Sukkar:
Well if this law passes, to be converting tens of thousands of dollars into jewellery they won't be able to do that via cash. They will have to do that via electronic means which gives our security agencies a better ability to be able to track, who they are, what they are buying and where it's coming from.
I mean when we look, often criminals who are convicted, the question that is often asked is "how on earth did 'Joe Smith' who has been unemployment on the books for the last 20 years acquire ten million dollars' of assets?" Well normally we join the dots to what's occurred. This is going to really assist our security agencies and law enforcement in stopping that.
Alan Jones:
There is a problem or there was, when I was working in government, it may have changed now, with the Westminster system - because of what I would call jumping the fence. That is, you're in Treasury. Do you have, because you're the Assistant Treasurer, automatic access to say the Tax Office records or automatic capacity to access Federal Police records? So that these agencies can be connected. So that the Tax Office sees that Alan Jones hasn't made any income here but another agency says that Alan Jones owns, bought ten houses in the last twelve months the Federal Police know X and Y.
Are all these agencies working together to identify where this is happening?
Michael Sukkar:
I suspect there is always a case for them working more closer together Alan. But if they are investigating a particular individual who has accumulated assets in a surprising fashion, then they absolutely have the ability to get access to those. You know subject to appropriate judicial oversight. They, of course, can get access to all of that data which is held by the ATO.
Alan Jones:
But wouldn't people try and circumvent this by saying well we'll restrict the cash transaction to nine thousand nine hundred and ninety nine dollars?
Michael Sukkar:
Yes, absolutely, there is no doubt about it. I mean it's a bit like tracking international flow of funds which have a particular limit. You know instinctively that the criminal gangs will just peg it just a little bit below. Having said that, our security agencies if they see transactions nine thousand nine hundred dollars, it normally, repeated transactions, it would, of itself, raise a red flag.
Alan Jones:
So I know that people are going to vote against this. And Bob Katter says he will and Pauline Hanson and so on. I mean, I'm very much in favour of everyone paying tax which they are obligated under the law to pay. Otherwise some people are paying higher levels of tax because other people are paying none and the Government still needs revenue.
How confident are you though, that everyone who should be paying tax is or what percentage of those people who should be paying tax, aren't?
Michael Sukkar:
Well can I just first say that, it might be counterintuitive coming from the Assistant Treasurer but what motivates this particular change - the $10,000 cash limit- is less about tax collection and more about smashing criminal gangs. That's what it's more about.
Alan Jones:
Well those tax collections are important, very important.
Michael Sukkar:
The latest ATO data is ninety percent of small businesses absolutely comply with the law. There's a small proportion of non-compliance which is related to the complexity of the tax system. So that is, honest mistakes, which are a separate category altogether. About six and half percent of small businesses have unscrupulous individuals that are avoiding tax.
Alan Jones:
You've got your headphones on there. Hang on there, Michael. Richard has just rang through. Richard, good morning? The Assistant Treasurer is here, Michael Sukkar
Richard (Talkback caller):
Good morning Alan. Good morning Minister.
Look, my background is 32 years in federal law enforcement. This is the worst policy decision/direction you could take. Three reasons very quickly.
You're going to - you've already said that ninety six percent of small business actually complies six percent doesn't. The rest is organised crime. You've got thirty six billion dollars' worth of organised crime. What you need to do is have a 'RICO ACT', like in the United States - Racketeering Influence Corrupt Organisations Act.
It came in, in 1970. And when 1970 came in, within twenty years, it wiped out the Mafia. It wiped out organised crime and they put together asset seizures linked to it.
Now this country does not want to do it. The Costigan Royal Commission wanted it. The late [Inaudible] wanted it and Evan Whitton in his book, 'Our corrupt legal system' wanted it. Now Barry O'Farrell [Inaudible] was given the advice by [Inaudible] Gallagher. Mick Young was [inaudible] Labor Government, that was knocked over.
The reason people don't want it. The backers of the Liberal Party. The backers of the Labor Party. They know what happened here in New South Wales. People would get caught. You would pick up organised crime and you'll take their assets. Minister don't do this to our country.
Alan Jones:
Ok, Minister
Michael Sukkar:
The point here is, we consulted widely with small business. There are not many small cafes or small retail shops that accept transactions of cash of $10,000 or more.
Alan Jones:
But what he is saying is, if you want to deal with organised crime, why wouldn't you take the American legislation which apparently has been successful?
Michael Sukkar:
Well, I mean that would ultimately be a question for Peter Dutton and our team in Border Protection and in other places. As a Treasury Minister, I mean, we are trying to support smashing criminal gangs through the tax system or through tax changes. But Richard might be right. There might be a whole heap of other things we can do. But limiting the ability to transfer cash that has been received from ill-gotten gains, I think is very straight forward.
[Interrupts]
Alan Jones:
He's saying it needs to be a bit tougher and he's most probably right. Listen, thank you for joining us. We'll need to talk again. You're doing a very good job nonetheless, Michael Sukkar and you're on the right side of things. That's what I like. So we'll catch up again soon.
Michael Sukkar:
Thanks Alan.