The " Black " Economy !

The Australian Tax Office estimates that it is losing somewhere between two and three billion dollars a year to what is termed the "Black Economy ".  A vast number of businesses have employees that are not recognised on the books they send to accountants and who never pay any tax because they are part of the "cash in hand " economy.  As part of this deal, they are usually paid less than the award that covers the type of work they do.

In some cases, this suits both parties.  Many unemployed who are getting the dole are also getting casual work on a cash in hand basis, while his or her boss makes a saving on what they would need to pay if that employee was officially on their books.

This black economy is vast.  Tax office investigators know that it is rife in cafes and restaurants, the beauty industry, building trades, road freight and transport.   It was recently publicly busted in a chain of convenience stores  which led to similar schemes operating in the manning of petrol stations.

The proverbial worm is starting to turn.  Last year the tax office received calls from 5573 black economy employees who dobbed in their bosses.  In the majority of cases this was by way of an anonymous phone call - which sparked an investigation.  As a result, the tax office monitored 127,000 suspected businesses and, conducted fifteen thousand audits and enforcement activities resulted in $ 208 million in fines and penalties.

The reason for these dob ins is obvious.  People who desperately want a full time job are finding that the only work available is limited hours in the black economy at a pay level well below subsistence. In many cases job scarcity means that their boss can enforce unpaid overtime on the basis that there are plenty more people prepared to work on those terms.  It is simply work and money - on a take it or leave it basis.

Black economy employers claim that the pay scales for weekend and public holiday work make opening a business unprofitable.  The only way they can keep their head above water is to resort to cash in hand employees, but in many cases this is pure greed because that lower payroll delivers super profits.

This black economy is not just an Australian problem.  It exists to a greater or lesser degree across the entire world and the loser is the government which is missing out on tax that is needed to finance the services that the entire community demands.  At the same time, pay standards which underpin awards are designed to deliver a living wage to all employees.

Fortunately, here in Australia this black economy is manageable.   The tax office chips away at it and now that underpaid employees are starting to dob in their bosses it is likely that the more arrogant cases will start to bring enforcement - and the resulting publicity will decrease its prevalence.

Spare a thought for the problems facing the tax people in India, where nearly ninety percent of trade is carried out on the black economy and a minuscule number actually pay any tax.   The Indian government has just implemented the withdrawal from legal tender of Indian banknotes equivalent to the Australian ten dollar and twenty dollar value - and the public has just a few weeks to change such notes to the legally available smaller denominations.

This tactic is designed to serve two purposes.   It will cause those with untaxed profits salted away to bring them into the open in a desperate need to convert them into small denominations and it will force the use of electronic money transfers on business to avoid the hassle of handling huge numbers of smaller banknotes to conduct any business  transaction.   The banknotes that have been discontinued are the largest produced by the Indian banking system.

It has been suggested that the only way to wipe out the world black economy would be to totally ban all forms of cash greater than one dollar.   It would force all trade into electronic banking, and as such it leaves a permanent record.   That is something that national treasurers must mull over when they give thought to turning their economies from deficit to surplus  !