The " Black " economy !

All levels of governance are scratching for money.  It is developing into a battle between those seeking new forms of taxation to exploit and those seeking to reduce the money drain by cancelling services.  The Mandarins at Treasury estimate that the " Black " economy is allowing $2.7 billion to slip past the GST tax net - and it overall costs the economy a loss of five billion dollars a year.

When the Goods and Services tax was introduced in July, 2000, the tax level was set at ten percent.   Australia is one of the few countries of the world that has not raised this tax to a higher level to increase the money flow.   It is called by a variety of different names in other countries and in many instances it is now levied at rates of between twenty and thirty percent.

Pressure is building to either raise the scope of the tax - and that means applying it to food for the first time -  or moving the tax upward above that ten percent level.

Perhaps this would be a good time to inject a degree of realism into the argument.   Every country in the world has a black economy, and no country has ever even come close to shutting it down.   In fact, the higher the official tax rate, the greater the incentive to dodge paying tax by operating a " cash in hand " economy.

The tax department conducts an ongoing battle to catch tax dodgers and make them pay their fair share of tax, but in reality it is the black economy that indirectly contributes to the overall strength of the GST.    Dodging paying tax comes full circle when the profit made is spent by the recipient.    If the black economy suddenly ceased - there would be an enormous drop in the level of GST receipts.

Maintaining economic strength is a matter of balance.   The compliance people need to be diligent to prevent the black economy getting out of hand and expanding exponentially.   In many cases, it is the incentive of a lower price because of the tax dodge that makes the job affordable to the end customer.   When people stop spending money, the entire economy suffers.   The black economy is an integral part of that cycle because what is lost in one sector of the cycle is gained in another.

Compared to other countries, Australia has a " manageable " black economy.  In the twelve years the GST  has been in place it has gained wide public acceptance.   Rarely do we hear people griping about it and a ten percent level is seen as " fair ".     Changing that level will set in train a change of circumstances that will certainly have many people rethinking their compliance attitude.   It could well be the start of an ever expanding black economy.

That old adage -  " If it 'aint broken - don't fix it "   comes to mind !