Publication date: 16 Jun 97 |
Source: THE TAX INSTITUTE
Although the Australian Tax Office's recent report on the Cash Economy goes some of the way to tackling the costly issue of leakages from Australia's tax system, it does not send a clear message to those operating in the cash economy that they will face prosecution when caught, according to Taxation Institute of Australia President, Mr Richard Gelski.
"The Taxation Institute applauds the ATO for its attempt to quantify and curtail the cash economy. Estimates of the value of the cash economy of between 3.5% and 13.4% of GDP are disturbing, but confirm the Institute's long held concerns about the level of leakage from the system," Mr Gelski said.
"However, if the ATO is serious about attacking the cash economy, they need to foster a fundamental change in community attitudes and send a consistent message that if you evade tax, you will be prosecuted," he said.
The Cash Economy Report cites six case studies involving evasion of tax via the cash economy. Of these six cases, only two taxpayers have been prosecuted, two may be prosecuted and two have received amendments to their tax assessments.
One example cited a taxpayer who ran a charter business and had been found to have not declared any of the cash received. When questioned by the taxation officer carrying out the audit, the taxpayer admitted that no cash had been declared but that it was taken to pay private living expenses and cash to wages to employees. None of his cash had ever been accounted for. The taxpayer received substancial amended assessments.
"With examples like these, it is not surprising that certain elements in the Australian community believe that they can get away with tax evasion, after all there is a fair chance that even if you get caught, you won't face prosecution," Mr Gelski said.
"The system of administrative penalties works well for many situations where taxpayers haven't fully complied with ATO regulations, but these cases are distinct from people who evade tax and therefore have engaged in criminal activity."
"If the ATO wants to win this battle, it must change its approach to prosecution and let taxpayers know that if you evade tax through the cash economy or otherwise, you should expect to be prosecuted," he said.