With the Abbott Government claiming an economic disaster is at hand unless its budget measures are passed by The Senate, predominantly much of what is being blocked is the government’s savings proposals along with some of its revenue raising ideas, estimated at $3.5 billion.
The finance minister Mathias Cormann has tried to up the ante by claiming that “Inevitably taxes will have to go up if spending cuts are not approved”. But do they? Given the rampant untaxed cash economy that exists in Australia. Is there an economic crises, would taxes have to go up as Cormann has claimed?
We all have had experience with the cash economy, even if it’s nothing more than a local tradie offering less for cash with no receipt. No GST, no income tax, no nothing to the government. Some will say that is just good business, no its not, that is just criminal.
How extensive is the crimes of the cash economy in Australia. It is estimated 275,000 businesses large and small engage in the cash economy. As far back as 2012 the Australia Institute said the cash economy was costing state governments alone $2.7 billion, add to this billions lost by the federal government from GST, income tax and other taxes and charges, then the figure is astronomical. If people like. Mathias Cormann were serious about an economic crises they would stop turning a blind eye to their mates in business and do something about this billion dollar rip off

Yes totally agree. I can't see why every business can't have a business account on the internet with every transaction having to be registered through that account and the person given a receipt for the transaction. If no receipt from that account is issued to the buyer, then the buyer could have the option of reporting it to the tax department with an automatic $10000 fine to the business and a reward to the buyer. Thus the tax department would a least have a very good idea of the gross takings of every business.
Around 20 years ago I heard a PhD student on the radio talking about this topic. They estimated at least half of all business did not declare around 30% of their income, mostly from migrant backgrounds from countries where people did not trust authorities.

It is an interesting conundrum indeed, Paul1405. And it poses a dilemma for us all - what should our own role be in the process?

When a tradesman says "that'll be five hundred for cash", what should be our response?

If you ask for a formal quote, chances are it will be substantially higher. But if you just say "great, it's a deal", are you a willing accomplice to tax avoidance, or merely a thrifty citizen? After all, paying cash is not in itself a crime.

The size of a country's cash economy is often related to the overall fairness of its tax system, but also to the prevailing social values. When we see around us people and businesses regularly and blatantly flouting the system - paying bribes in wads of notes, using tax havens to "legitimately" reduce their tax liabilities etc. - there is a tendency to say "well if they can do it, what's the harm?"

And with the sheer incompetence and venality of successive governments in this country, I can't see this changing any time soon.

People need to start doing more for themselves, the way people used to do and not wait for government to provide everything for them.

I was chatting to very nice Korean gent today, in weeks he has a productive vegetable garden going in a yard that generations of renters have used as a dump and refused to mow the grass. Will be dropping off some seedlings to him later. His English is poor but gardeners don't always need words.

I sold good businesses when it was impossible to keep them small and expansion was not really worth it after taxes and other costs of doing business were taken out.

I reckon there is a future for communities to exchange products and services among themselves. People are inventing ways to join in the fun. There is an old fellow locally who exchanges his jams for services he needs. We give away stacks of soups, pickles and other foods that I make for family members. I always make too much, a carry-over from farm days, packaging it and setting aside for other locals who appreciate and value (and may need) such things. Maybe one day someone could do the same for me.

Although as intimated earlier, there are always those who would die in a week were it not for Centrelink, Town Water and Coles.

Paul1405, maybe some of your 'Watermelon' Greens can do something for themselves instead of constantly minding other people's backyards and business for them?

I'm a tradesman and I never ask for cash, it's bad manners and makes you look dodgy, if the client offers to pay cash up front that's a different story.
and...to hell with the government, we should all be working toward marginalising and eventually eliminating the federal government altogether.

Paul, by far the best method of restricting the cash economy would be to introduce a transaction tax. Because the vast majority of money is now paid in to (by way of wages) and withdrawn from bank accounts, there would be no dodging of the small tax.

Of cause the other grey area is online purchases, those under the threshold, as they too would be taxed if a TT was introduced.

Off shore deals would also be caught in the TT web. It's a win win but no one will go there. Go figure!

I'm not convinced, rehctub...

>>...by far the best method of restricting the cash economy would be to introduce a transaction tax. Because the vast majority of money is now paid in to (by way of wages) and withdrawn from bank accounts, there would be no dodging of the small tax.<<

Would not such a tax actually serve to encourage people to use cash at every available opportunity, rather than transact through a bank account, or a credit card?

If the ordinary citizens were not prepared to pay cash then there would be no cash economy worth speaking of.

Then there are those who barter goods or services; what to do about them?

Pericles, very few people get their payments in cash these days and, for those who insist on using cash only, they are now very small fish in a very large ocean. Even the likes of markets have to spend their money buying goods to resell and, their cash only suppliers are also drying up. So no, I don't think it's a problem.

On average I pay $310 per week in tax, tax on my earnings of between $1300 and $1400 so, if I was taxed just 2%, I would be some $282 better off each week. So too would many Australians.

Taxing money transaction, as they occur, and when they occur is far better than taxing people before they spend their money, because unlike income tax, a TT happens every single time money gets banked.

Short of removing the use of cash entirely there really isn't a lot that can stop "cashies", governments everywhere have been trying and failing for centuries.
The simple fact that a transaction tax IS fair and efficient guarantees that it will never be introduced, that's just realpolitik.
Far more could be achieved by acting immediately on trusts and an extended phasing out of negative gearing and they're equally unlikely, to say the least.

I believe there are many advantages that could accrue to individuals and communities from adopting bartering, and even their own token systems to exchange service and products.

There are examples available and maybe some videos, so I will not go further, except to say that women and retired folk especially should look carefully at the advantages. It does not mean cutting out the 'mainstream' currency, banks and so on.

Butch, I think your idea would work, but to make it practical you would have to make it a completely cashless society. I think the technology is there, at least in the developed economies like ours. As cash has been around for yonks there would still be a lot of resistance to such a move. What do you think.

I think that was exactly my point, rehctub.

>>a TT happens every single time money gets banked.<<

So it follows, that the less often you use the bank, the less often you are taxed on the transaction.

Let's say, just by way of example, that you choose to take all your "between $1300 and $1400" out of the bank in one hit. As you say, you will incur a tax of thirty bucks or so on the deal, which would leave you better off than if your money had been taxed at source.

But not only would you benefit from that, but you would be in a position to get "pay less for cash" on a range of transactions every week, that would benefit you even more. If you use cash instead of a credit card for instance, that's automatically saving you money, right there at the checkout.

More than anything else though, it is the signal that you are sending with a transaction tax that will inevitably change the behaviour of both buyers and sellers: if you are seen to transact, you pay. Most people will willingly look for alternatives, when faced with this option.

The only possible chance that a transaction tax will work, is if/when society relinquishes cash forever, i.e. there is no alternative to electronic (therefore visible) transactions.

When do you reckon that might happen?

"Some will say that is just good business, no its not, that is just criminal."

Paul, you've got it back the front. The only way your statement could make sense is if everything and everybody belong first and foremost to the government, and then your right to freedom and property is whatever is left over after the government has taken and done whatever it wants.

Needless to say, what you are advocating is criminal.

There is no moral obligation to pay tax. There is indeed a moral obligation to avoid it because:
a) it based on threatening to shoot, cage and rape people, which is what you are advocating without understanding what you're talking about
b) it makes society poorer
c) it promotes parasitic behaviour
d) it undermines the only moral basis of human society, which is private property
e) it is used to fund all the governmental activity that you disagree with.

You guys are mad, sad and bad trying to restrict the cash economy. Talk about Stockholm syndrome. We should be trying to restrict the tax vampire economy, and the violence-based greed and grasping of the political/parasite class.

Dear Jardine,

I agree with most you write, but I have a problem with the following:

<<There is no moral obligation to pay tax>>

As I see it, cash is printed by the government: nothing prevents government from attaching conditions to the cash it prints, including taxation. If you agree to take it and use it, then wouldn't it be a moral requirement to stick to this agreement? Besides, unless you are upfront about it, avoiding tax normally involves lying or cheating, which is immoral.

As for taxing foreign currency transactions/income, this could perhaps be justified on the basis of international taxation agreements between governments, but what is truly atrocious are the laws which restrict bartering and/or printing your own money - this is the real problem, rather than the taxing of government-issued money.

But how can one evil cancel another?

Pericles, with respect you are missing the poimt.

Whether you take your money in a lump sum, or in one dollar incumbents, you still pay the exact amount of tax, as unlike income tax, a flat TT is a set % of the transaction.

Now as for the cash society, yes, nothing short of a cashless society will prevent that, however, those trading in cash only, with no receipts are becoming scarce and, even your local chinnesse takeaway/bakery, the main culprits of cash only businesses have to bank all but the profits from their business just to pay the bills. Then, chances are once the spend their cash, the receiver will bank it anyway.

A transaction tax is the closest thing to being unavoidable. Besides, at just 2% I doubt many would bother trying.

Just a thought.

What if the framework for taxes was that they represent or are an access fee (or franchise fee) to be able to live, supply labour and services in a marketplace or society?

Those same taxes can be thought of as the investment vehicle to provide both physical and social infrastructure to a society.

Should one wish to access the infrastructure then a (franchise fee) ie taxes need to be paid.

No payment of franchise fee (taxes) seems to me to indicate a bludger, free loader or grafter.

Rehctub I have one problem with your system.

If government is to continue to pay for all it does now, public service, defense, education, health, welfare, & all the other things, so many of which we used to look after ourselves, they must still collect the same amount of money.

If this is the case, not one cent will be reduced in their take, no matter what the system used to collect it.

Yes the tax burden may be distributed somewhat differently, but without spending cuts, it must be the same gross take.

You may gain while I lose, but someone must pay. If that comes down to business paying more than now, as would appear likely, they will have to increase prices to cover this cost.

PAYE & small business people may gain in take home pay, but they will still have to fund the ever growing, & terribly inefficient government services they demand. This would have to be by an increase in prices that industry would have to charge to cover their new costs.

Swings & roundabout comes to mind with any change which is revenue neutral.

But hasbeen, what makes you think this tax would be revenue neutral. It's a tax on money and, just because say one billion dollars gets spent every day (I don't have clue just how much) doesn't mean there is one billion in money, simply because the same amount of money. Gets spent time and time again each and every day and, much of it is not real, it's electronic money passing from one account to another. It has been suggested that a very small TT could fund all our needs and replace every other tax we have and, the more one earns/spends, the more one pays. What can be fairer than that!

What is absent from this discussion is recognition of how the money and banking system works and whether that is the best for the future. Regardless, technology and globalisation are going to see increased numbers of citizens on the periphery for periods of their life and in some cases for many years. An easy example could be the new 'old', which can be anyone over 45, who can expect scores of life where they are unemployable in the present economy, but in a barter system could earn for all of their years.

The dissatisfying elements in the discussion are the acceptance of increasing taxes, apparent lack of interest in curbing State interference in private lives and acceptance that what government presently spends your taxes on is justified, which it is often not.

If a government really wants to save money and even a cursory look at (say) Q&A 'debates' should convince any independent observer that a lot of taxpayers' $$ has been expended for decades for no effect (eg on indigenous housing), there needs to be some statesmen tener cojones in the federal Parliament.

I am astounded by people who believe that the bucket of taxpayers' money is inexhaustible and there are always more taxes to be collected, saying it is a 'Lucky Country' and a 'Wealthy Country'. The previous Labor+Greens federal government cast about everywhere for more taxes, including CGT on the home, which is not now proof from attack, and death duties (a favourite of the Greens).

I despair at the mindless naivety of this thread. The proposition is that the government would not need to cut spending or increase taxes if only we could tax the black market.

Well Duh! It is not as though every tax office in the world is not trying to do the same, and tax offices have gone as far as to prosecute restaurants for under reporting income based on their purchases of coffee (in proportion to meals served). For the maths tutor, the plumber etc paying marginal tax of 45%, some 20% cash discounts to private householders is extremely lucrative and untraceable.

The reality is that Labor's budget black hole is not going to be filled by these thought bubbles, and the alternatives are limited to cutting spending and/or raising taxes, or passing Labor's debt sentence onto our children.

One other thing I might pick up while in the mood to waste a few minutes, is the belief some have that citizens always seek to avoid taxes and must be constantly monitored, investigated and punished to force them to pay.

There is more than enough practical research to prove the exact opposite: in fact people are more than willing to pay taxes providing the taxes are fair and the money taken from them by the State is applied to good use.

The attitude of both sides of government to the ATO is that it is a revenue collector, a 'profit centre', and the ATO for its part was very quick to take advantage of knowledge that it could justify large staffing (and executive salaries), and unfair adversarial treatment of ordinary citizens, if it could show that the money coming in exceeded ATO costs in collecting it.

Government has forgotten that it is there to serve the public, not the other way around and yes, government is obliged to show that it is using those taxpayers' dollars for real priorities and getting value for money in the process. That should rule buying votes (and the imported population to vote 'reliably') out of the question, shouldn't it?

Rehctub & others, I agree that we desperately need to cut spending. That Labor black hole is going to swallow us sooner or later if not addressed. The big problem is how.

The Government tried to do just a little with this very gentle budget, & the left & the lefty media are still screaming horror horror, & calling for Hockey & Abbotts heads. Even if Tony had the guts & the will to cut spending as much as he ought, it would never get through the senate or the government survive.

That is why I suggest any tax reform has to be revenue neutral, but would probably have some hidden grab at our wallets who ever introduced it.

Maybe if we could reclock our country, as one can with a computer, & set us back to about 2005 we could get back on the rails. I think those last 6 years of Rudd/Gillard/Rudd has set us beyond redemption. Too many are too used to the handouts for them to ever be removed completely. It looks as if much reduction is too hard too..

For how we will manage, we can only look to Greece to see our future some time soon.

The mining tax may be gone, but for the Greens it has had it's desired effect, the mining companies, now scared, have run for the hills. They will not be back anytime soon.

Yes we will still have the export dollars for the production for years, thank god, but those high paying mine, port & rail building jobs are rapidly winding back.

How families, used to $140,000 a year FIFO jobs, will go on $55,000 normal town pay rates will get on is yet to be seen. Not too well is my guess.

I was just reading a discussion with many expat Poms suggesting it would be hard to live in Perth on less than $150,000 a year. I wonder how the check out chicks get by?

Re barter, there is or was a barter system operating in the Blue Mountains.
Another syatem is the gifting societies and also the Transition Town
such as Totness and several hundred others.
Some of these have their own currencies which they buy with GBP at a
bank in Totness and only spend in the town. Keeps the profits in the district.

The idea of a transaction tax seems to have merit as eventually the
money has to go in or out of a bank. However the transactions in between would not be taxed.
I am sure the tax dept has a computer program somewhere that looks at
the plumbers bank accounts and compares what he buys at Bunnings
against what he reports as a GST statement.

It is not amusing that the Greens and leftists savagely opposed moves by State governments to put a brake on organised crime and especially Bikies. Drug manufacturing and trafficking are valued in the $billions annually and NO tax. Add to that the public health and other costs to the taxpayer.

Hypocrisy.

Why we still need cash.

Six weeks ago I had some plumbing done. I got a handwritten bill in the mail, with GST but no banking details. I didn't have a cheque book any more - the cheque account had just been hacked and I'd closed it. So I rang the plumber and spoke to his wife - said I'd do a direct debit - what was the account number etc. Alas, she said, we've just had to close our business account because it was hacked - I'll get back to you with details of the new one soon. No worries, I said, I'll put some cash in an envelope, tell him to call in next time he's over this way. Which he did, and we had a chat about cash v. cards.

So ultimately I think we'll still need cash for when the electronic systems fail us.

Re bartering: I live in a small country town where a bit of this goes on. I recently 'sold' a lounge chair to a coffee shop for several weeks regular coffee. But what happens when everyone has a glut of the same product to barter? Right now everyone here has oranges - it's impossible to give them away, let alone trade them.

Cossomby,

Hi

As you realise and I am only saying this for others who may not read earlier posts, I am not recommending barter to replace, but to supplement.

You have raised the interesting matter of specialising though (oranges). Again, specialising in itself is not the problem, but allowing a single industry to dominate could be.

There is no reason why cottage industries shouldn't thrive at the same time. Maybe it was other changes such as refrigeration and supermarkets that saw the demise of small crops and other small business supplementing income or providing out of season income. Just talking about those, supermarkets do have an obvious effect, noticeable even in large towns.

Anyhow, in the future I reckon that governments (and banks!) may well find themselves having to manage without their strangle-hold on the currency of exchange, especially a currency that is based on smoke and mirrors and open to currency speculation and manipulation. -I detect that some, older folk for instance, are already feeling marginalised and more outside than a part of the said financial system.