TOM CONNELL:
The Government is vowing to crack down on tax cheats to recoup an estimated $5.7 billion in lost revenue and aid Budget recovery. Joining me now to discuss this clampdown is the Assistant Treasurer, Stephen Jones. Thanks very much for your time. We all know broadly what we’re talking about I think, you know, the old line, “Would you like to pay cash?” – who’s doing this the most out of industries?
STEPHEN JONES:
Look, according to the Tax Commissioner and their data, the shadow economy is a significant area of noncompliance, not just there but, you know, a significant area of non‑compliance. Not just there but a significant area of non‑compliance. Building and construction industry has been seen as a longstanding area of non‑compliance, but also – well, frankly, there’s criminal elements operating in this area as well. I don’t mean in the building and construction industry. I mean elsewhere in the shadow economy, and it’s a big cost, it’s a big cost to taxpayers. It is about $33 billion a year in tax owed but not paid and to put that in context, Tom, that’s about how much we spend on Medicare each year. At a time when the Budget is tight and Australians are expecting more out of government, we’ve got to ensure that everyone is paying their fair share.
CONNELL:
So, there’s a penalty if you don’t pay tax. We all know that. What about for the other side of the equation? So, someone says to me, “Do you want to pay cash?” and I think “Well, why not? You can risk it. I’ll get a discount.” Is there any penalty for me in that – hypothetical, I should, stress – situation?
JONES:
Well, the person who is doing the wrong thing is the person performing services. They’re the ones who have the obligation to be keeping their books in order and ensuring they’re declaring their income accurately to the Tax Commissioner. The important thing here, too, is if you have got two businesses operating side by side, one of them is complying with the law and the other one isn’t, the non‑complying business gets an advantage over the one that’s doing the right thing, so everybody loses in that situation. We can’t have a tax regime or an economy operating on the basis of the people who are doing the wrong thing getting an advantage over the people who are doing the right thing. That’s just not fair, and it’s the taxpayer who loses and you have a very distorted economy. And there are countries overseas that operate on that basis. We don’t want Australia to be one of them.
CONNELL:
But if you want to go really hard, you might also look at the lack of disincentive, I suppose, for want of a better description, for the person getting the offer of “You want to pay cash”; if it’s sort of risk‑free for me as a consumer, I might say yes every time.
JONES:
Look, our activity – and I've got to say just on this, Tom, the Tax Commissioner has a discretion and exercises that discretion. And we’ve just gone through floods and bushfires and a pandemic and throughout that period, there was a fair bit of forbearance for households and for small businesses because we knew that they were doing it tough. But as we move through those emergency situations, it’s now incumbent on all taxpayers to ensure that they’re doing the right thing and they’re paying what is lawfully due to be paid. The focus is on the business or the individual who are doing the wrong thing. It’s not about fines; we’re actually not out there trying to fine people. We want to put in place systems that encourage people to do the right thing first up.
CONNELL:
Government is edging towards some pretty major action in terms of gas and how we might change prices in Australia, supply, but even taxation as well. Already getting warnings of a sovereign risk here. What’s your response to gas companies saying that if you intervene too much, you will create a risk?
JONES:
Well, record prices for gas and for coal, I have to say, mean that the companies are making record profits at the same time as Australians are paying record prices for their electricity. Don’t begrudge a profit, a reasonable profit for the companies, but we’ve got to ensure that when we’re going through an energy emergency as we are at the moment, that households and domestic businesses are protected and you talk about sovereign risk - I’m concerned about the risk to local manufacturers, the risk to local small businesses and the risk to households that they go under because of exorbitant – and energy prices going through the roof and that’s the sector of the economy that we want to be able to protect and ensure we can get through this emergency.
CONNELL:
Okay. So, it is an emergency for a lot and it’s one that’s going to happen really soon, so the answer can’t just be opening up new gas or future gas reservations. It seems as though this policy will have to affect suppliers that have signed contracts that got into gas under certain conditions in Australia and those conditions are going to change. That seems pretty obvious. Is that going to be the case?
JONES:
Look, we’ve got everything on the table. There’s been discussion about reservation policy; even if we reserved all the uncontracted gas, it would be less than 10 per cent of the East Coast gas demand over any given year. So, clearly that alone is not going to be the answer. It’s why we’ve got to look at all the options that are available to us, and it’s why Chris Bowen met with all the state and territory Energy Ministers on Friday and they agreed that we need coordinated action, not one state moving against or in the opposite direction of another or the Commonwealth. We’ve got some levers. The states have got some levers. We’ve got to bring them all together and work cooperatively to ensure that we can provide relief to households and businesses.
CONNELL:
Even if there’s an attempt to say sovereign risk, you might be increasing the tax that’s charged on gas being exported, that happens after they sign these contracts, long‑term contracts, or capping price charge in Australia, whatever it might be – that it’s pretty unusual for a Government to do that, but it’s unusual times and that’s why it’s going to happen?
JONES:
I haven't – first things first, Tom, I haven't said that’s what the government is going to do.
CONNELL:
No but that’s on the table?
JONES:
Everything is on the table. Let’s be clear about that.
CONNELL:
I guess my point of that question to make it a bit pithier is, whereas previously no existing contracts will be touched, this feels like a different situation.
JONES:
I think it’s a mark of the extraordinary times we’re in, Tom – nobody could have predicted that the war in Ukraine would be as protracted as it is, and would have the impact on gas, coal and other commodity prices and, therefore, energy prices around the world. It is a mark of the extraordinary times that we’re in that, you know, things like this could actually be on the table, but, you know, we’ve got our number one duty, our number one obligation, is to look after the interest of households and local businesses. We will try to balance that up with all of our other obligations and try to ensure we get the balance right and do the right thing by everyone, but our number one concern is energy prices for local households and businesses.
CONNELL:
We’ll know soon enough, Stephen Jones, and I’m sure we’ll talk again once we do. Thank you for your time today.
JONES:
Good to be with you.