STEPHEN JONES:
Well, today we’re going to be releasing and tabling the annual Tax Office report. Within that report is a section on tax compliance, what we call the tax gap report. The good news is that when compared to other countries around the world Australia has a very high level of tax compliance at 93 per cent of all taxes owed being collected. And that’s due to the great work of Chris Jordan and the staff at the Tax Office. Of course, tax is the price we pay for living in a safe, secure, decent, civilised society. It pays for Medicare, for education, infrastructure and keeps our defence forces strong. Absolutely essential. Ninety‑three per cent, you might look at that and say that’s a good result. But the 7 per cent, that’s around about $33 billion of taxes that are owed but not collected. And to put that into context, $33 billion is about what we spend each year on Medicare. So, it’s a large amount of money. That’s why the Albanese government is targeting compliance with our existing tax laws in this budget. We’ve provided additional resources to the Tax Office to ensure that they can target those areas of specific non‑compliance. We think that we can over the course of the forward estimates bring in an additional $5 billion under existing laws. That’s $5 billion of money that is already owed under existing laws to ensure we have that money available to pay for Medicare, to pay for education, to fund additional infrastructure and to ensure that we can keep our defence forces strong and ensure that this government can start the difficult task of bringing down the budget deficit and paying off the debt. The more money that we’re able to bring under existing laws ensures that we not only have a level playing field because if you’ve got a group of companies that are doing the right thing and pair their fair share of tax, competing against companies that are doing the wrong thing and not paying their tax, you don’t have a level playing field. So, everybody has an interest in ensuring that we do the right thing and comply with the existing laws. We don’t want to have a system with our business and company tax, for example, where you’ve got one small business paying all their taxes as and when they fall due and they’re competing against another small business that isn’t doing the right thing. They have an unfair advantage, and we’ve got to ensure that that’s not occurring. That’s why we’re focusing on the shadow economy as an example of one of the areas that we’ll be cracking down on to ensure that within the shadow economy more of the money is collected that is owed. So, this is a priority, an additional $1.5 billion invested in this budget over the forward estimates to ensure that we can have every cent that is currently owed to Australians – not to the government, to Australians – is being paid under our existing tax laws. I’ll invite the Commissioner to say a few words, and then we’re happy to take any questions. Thanks, Chris.
CHRIS JORDAN:
Thank you, Minister. The Australian Tax Office publishes the most comprehensive suite of tax gap figures more than any other country in the world. We’ve been doing it for five years now and, pleasingly, the original tax gap of 8 per cent went down to 7.4 per cent for the 2019 year and down to 7 per cent in the most recent year, 2020. There is obviously a lag in our calculations of that. It's heading in the right direction, but, as the minister said, there is much more to be done. Two of the largest areas – small business tax gap – it is just simply unacceptable that the shadow economy is more than 60 per cent of that, around 7 or $8 billion a year. Pleasingly, we have been funded to continue our work in the shadow economy task force for a longer period with additional money. In the individual space – the second highest dollar amount – work‑related expenses constitute about 40 per cent of that tax gap. We will never be able to audit our way through work‑related expenses. However, again, it is pleasing that we’ve been given additional funding and extended the period of our policies and projects in the individuals area. That will require more data feeds. And pleasingly, the Tax Practitioners Board has been given extra funding to deal with those tax agents – small number – that they go beyond optimistic to beyond creative. And we have to deal with this given the significance of that figure and the fact that we just can’t audit our way through it. Thank you.
JONES:
Thanks very much. Happy to take questions.
JOURNALIST:
With the Housing Accord announced the budget, how many superannuation funds have signed up so far, and which ones have signed up?
JONES:
Well, I’ll invite my colleague Julie Collins, who is out and about today, to go through the details of that. But in talking to the peak organisations representing the superannuation fund industries, they’re all very enthusiastic about it. All of them have said to myself, the Treasurer, the Housing Minister in the past that they’re keen to get into investing in housing as a new asset class. Some of them are already in there. I know, for example, Aware Super is already in there. I know CBUS super is already in there. And I know there are a lot of other superannuation funds that are keen to get in there and do the right thing by their members by getting great returns but also the right thing by the country.
JOURNALIST:
A question for commissioner [indistinct]: what do you intend to do with the crackdown on the shadow economy? How will that work in tax terms? And what sort of groups of small businesses are the worst offenders when it comes to unpaid tax? And to the minister, if I can ask, you know, we’re expecting the Reserve Bank decision tomorrow. It’s a line ball at this stage. What do you think that will do to people’s cost of living pressures at the moment?
JONES:
Look, I’m not going to speculate on what the Reserve Bank does or doesn’t do in its decision tomorrow. I can say that we know that households are doing it tough. The combined impact of rising inflation and, of course, rising interest rates are putting real pressure on household budgets. That’s why in our budget that we released last week we were giving primacy to ensuring we don’t make a bad situation worse by spreading billions of dollars into the economy, additional money into the economy, and it was already overheated, and we’ve already got a problem with supply shortages and inflation. We’ve got to give space to the Reserve Bank to do its job of bringing inflation down through its independent charter and ensuring that as a government our fiscal problem – as a government our fiscal policy doesn’t make a bad situation worse.
JORDAN:
In relation to the shadow economy, there are two parts to that, one of which is cash wages, people doing cash jobs, tradies et cetera. The other is just simply out of the system. Now, where we look at the funding, an extra 200 million a year for the tax avoidance task force, that will give us an additional 1,000 people, but that's at a higher level looking at a defined set of companies, wealthy private groups, wealthy individuals. But it does spill over to the black economy work as well. A lot of what we need to do in the shadow economy is better data feeds, better analytics and better matching. It is going to be very, very difficult for a business to simply stay out of the system going forward. Our data holdings, our capabilities in the analytics and management of data are increasing exponentially.
JOURNALIST:
Minister, back in June you mentioned that Treasury were looking into requiring firms to pay superannuation at the same time as they pay wages. What’s the status of that work, and what’s the government’s current position toward that policy?
JONES:
We’re still looking at that and other measures to ensure that every cent of superannuation is paid as it should be. If you have a look at the data that is going to be published today on the gap in superannuation payments, it’s around about $3 billion. Now, some within the industry say that’s the bottom level. Even if it is $3 billion – not $6 billion as some estimate – it’s a hell of a lot of money that belongs in workers’ superannuation accounts. So, talking to the Tax Commissioner about a greater focus on compliance in the area of the superannuation guarantee levy, and talking to Treasury about what are the measures, including the one that you mentioned, we might be able to put into place.
JOURNALIST:
Commissioner, what’s been the effect of COVID‑19 on the tax gap? Do you see much difference in the first set?
JORDAN:
The biggest effect of COVID‑19 is in our collectible debt increasing. If you go back to February 2019 to August 2022 our collectible debt went from roughly $20 billion to $40 billion. Most of that is small business, self‑declared debt. It’s not tax on profits; it comes back to the earlier question. It’s unpaid superannuation guarantee. It’s the GST that’s been collected and never remitted. It’s the withholding from wages pay as you go that has never been remitted. So that is a – the most substantive part of our collectible debt increase and the most substantive impact of COVID.
JOURNALIST:
How low do you think you can get the gap in years to come?
JORDAN:
We have a plan. It’s up around eight and a half per cent of collections. Historically it’s about five and a half. We compare well with other jurisdictions that have gone through the same: COVID obviously. So, we have a plan to get it back down to five and a half within three to four years.
JOURNALIST:
Commissioner, are there certain industries that are worse when it comes to unpaid tax avoidance?
JORDAN:
Building and construction has been one of those. There’s been a number of sort of collapses in that area. I think a lot of fixed‑price contacts with increased input costs have really squeezed those. Otherwise, it’s across the board. And mainly small business who have collected amounts that are never theirs, and it comes back to the timing of the payment. There is no doubt that the longer people hold on to money the less likely they are to be able to pay it if things go rotten.
JOURNALIST:
Minister, just quickly, the Treasurer has mentioned in the past week or so review the Treasury is doing into the PRRT – the petroleum resource rent tax. Do you know when that’s expected back, and would you like to see that, you know, collecting more revenue in the budget?
JONES:
Of course, we want to see that Australians are getting a return on our bounty of natural resources. I think there’s some pretty well‑founded criticisms that the design of the PRRT – designed for a different era, when it was all about encouraging investment and exploration in new resource deposits – I think there’s some legitimate and legitimate criticisms being raised today about whether it’s current design is fit for the times. So, Treasury has got a job of work going on looking at that. We want to ensure that we get as much as is reasonable and due to the Australian people. But I want to make it quite clear that’s an issue of policy design and tax design, not of compliance with the existing law. And the stuff we’re talking about today is around compliance with the existing law - $33 billion worth of tax currently owed but not being paid. That’s the focus of the additional resources we’ve paid to the Tax Office and the excellent work that they’re doing.
JOURNALIST:
Minister, you had a parental leave package in this budget but it didn’t include superannuation. When are you going to address that, because industry is already asking for it?
JONES:
Look, the Prime Minister, the Treasurer, myself, the Minister for Women Katy Gallagher, we’ve all made it abundantly clear this is something we really want to do. We’ve got to find head space in the budget to enable us to do it. It wasn’t an election commitment, and the things that we took to this budget were about implementing election commitments. But I think if you look at what we did in the area of paid parental leave, I think by any analysis what we did was an extraordinary thing by extending it to six months and putting in place equitable mechanisms to ensure that the male and female – the mother and the father – are sharing more equally in those caring responsibilities. Super on paid parental leave, yes, we want to do it. We’ve got to find the space to do it in the budget.
JOURNALIST:
So far, your government has said that you’d like to see superannuation invest in housing, invest in Indonesia, invest in renewable energy. Is it right for the government to ask superannuation funds to invest in political priorities rather than asking them just to do what’s best for Australian investors?
JONES:
Well, let’s be clear – these are national priorities. And we’ve got $3.4 trillion worth of national savings as a result of visionary policy decisions in the 1980s. Over the term of this government and into the next that $3.4 trillion will grow to $5 trillion. As important as the Australian Stock Exchange is, we can’t invest all of that money in Australian equities. We’re already doing an enormous job of work around infrastructure, already doing an enormous job of work around renewable energy. But in our near region we’ve got the pension funds of other countries investing in Indonesia, in Singapore, in the Pacific whilst Australian pension funds are relatively absent. So, it must strike us as a little bit strange – it certainly does our neighbours – to know that we’ve got the Canadian pension funds who are more deeply invested in Indonesia or Malaysia than they are – than Australian pension funds are. So, what the government of Australia is saying, what the Albanese Labor government is saying is let’s get our heads above the desk and look abroad. Let’s not fly over Jakarta to look for investment opportunities in Europe. Let’s look at our near neighbours. And if we can align our national interests with the best interests of our members in superannuation funds, then we’re nuts if we don’t try and close deals. Thanks very much, guys.