Black Economy in Australia: How it Hurts Businesses

black economy Australia

The black economy, also known as shadow, cash, or underground economy, refers to people who evade their tax obligations. As such, they engage in illegal, dishonest undertakings such as understatement of takings, welfare fraud, off-the-book cash transactions, false declaration of income, and a lot more.

Why do business entities engage in the black economy? Perhaps the most prominent reason, as is defined, is to avoid paying taxes. For 2016-2017, the tax rates for companies is at an average of 30 percent, and not fulfilling that obligation means that it goes directly to their own pockets.

Effects and Dangers of the Black Economy

Being an illegal practice, it has repercussions that affect the greater majority. If left unchecked, it can cause the business district to go awry and imbalanced.

  • Honest Taxpayers are Penalised
    Because those who participate in the black economy do not pay their rightful taxes, the burden is passed to those who do. Those who are mostly affected are small businesses who do the right thing, thus it would appear they are being cheated in a dog-eat-dog world.
  • Society on the Losing End
    The practice of tax evasion is almost directly reciprocal to the exploitation of workers and the welfare system. One black economy method known as phoenixing strips a company of the obligation to pay their employees, making it completely unfair.

Current Black Economy in Australia

In May of 2017, The Australian has reported that Australia’s black economy is already at a whopping $50 billion. Such a jump is attributed to illegal activities such as money laundering and drug trade. This number will likely continue to grow, unless it is controlled.

As responsible business owners, it is important to stay on the right side. If you carry on with your business within the law, you should have a clear conscience.