‘CONTROL FREAKS’: How they’re coming hard for your wallet
BIG Brother is coming for your wallet.
From expiry dates on $100 notes and cash payment limits to tracking chips, internet snooping and now central bank-issued digital fiat currency, the battle plan for the war on cash is taking shape.
With the federal government's Black Economy Taskforce set to hand down its final report next month, the head of the corporate watchdog has weighed into the debate with an ominous prediction.
Speaking to the The Australian Financial Review on Monday, ASIC chairman Greg Medcraft predicted traditional bank accounts may be unnecessary within a decade as central banks begin issuing their own Bitcoin-style digital fiat currency.
While central banks already have digital settlement accounts with the financial institutions, Mr Medcraft predicted that those would soon be extended to everyday transaction accounts for the general population.
"With central-bank issued digital currencies, you might not need a bank account anymore," Mr Medcraft said. A digital fiat currency, while convenient, would also be convenient for the government - able to be taxed, tracked and confiscated at will.
"The disturbing thing, understanding that they would want to join the digital currency milieu, is knowing what a bunch of control freaks they are, I can almost guarantee they will say, 'Now we've got a digital currency, all other digital currencies are illegal,'" said Liberal Democrats Senator David Leyonhjelm.
"The likelihood is they will fail to prohibit them even if they try, and that will be amazingly positive, because then we will have private currencies competing with fiat currencies, and that's something us libertarians have been hankering for, for ages."
But Senator Leyonhjelm slammed the federal government's war on cash, describing it as the biggest threat currently facing the freedom of everyday Australians. "This pursuit of the black economy is probably the biggest threat to our liberty of all," Senator Leyonhjelm said.
"This idea that you've got to be more regulated otherwise the black economy will grow and therefore the government will miss out on its taxes, that worries me, because they seem to take the view that taxes are sacred and anything that protects [tax revenue] is legitimate."
Senator Leyonhjelm said while "most people accept paying tax as a civic duty", there was a limit. "We are past that limit, so avoiding taxes is much more likely," he said.
"Getting rid of $100 notes, putting restrictions on cash payments, these are all directed at increasing taxation ... [when taxes] already exceed what people regard as a reasonable taxation level."
Estimates for the size of Australia's so-called black economy vary from $23 billion to $50 billion. The government claims tax avoidance through cash payments costs the budget up to $10 billion in revenue, money that could go towards funding welfare and other services.
Senator Leyonhjelm said the current government had lost its way. "I hear people in this place [parliament] say that letting people keep some of their money is a 'concession'," he said.
The government first announced its cash crackdown last year, singling out the $100 note for review - prompting the RBA to come out in defence of the largest denomination bill by pointing out that criminals prefer $50s.
Last month, investment bank UBS blamed the Commonwealth Bank money laundering scandal on "outdated" $50 and $100 notes, having earlier called for the removal of large-denomination banknotes, saying it the move would be good for the economy and the banks.
"Benefits may include: reduced crime (difficult to monetise); increased tax revenue (fewer cash transactions) and reduced welfare fraud (claiming welfare while earning or hoarding cash)," UBS analyst Jonathan Mott wrote.
"From the banks' perspective there would likely be a spike in deposits - if all the A$100 notes were deposited into banks (ignoring hoarded A$50s), household deposits would rise [roughly] 4 per cent."
The Black Economy Taskforce's interim report contained a number of proposals, including an "economy-wide" limit on cash payments, the use of consumer penaltiesfor failing to get a receipt when paying in cash, and the use of biometric data such as "fingerprints, palm prints, iris and facial structure" to monitor the black economy.
A subsequent consultation paper, which "provides additional policy ideas", went even further, floating expiry dates and "tracking technology" for banknotes, banning of encrypted messaging phones and apps, and "scraping" of internet traffic to identify "suspicious patterns of online activity".
According to the Reserve Bank, cash withdrawals from ATMs have fallen by about 3.4 per cent annually since 2009, while credit card transactions are growing at 7.3 per cent per annum, driven by tap-and-go technology.
There are currently 335 million $100 notes in circulation - or about 14 per every Australian - and 92 per cent of all currency by value is in $50s and $100s. "Cash, in contrast to its electronic alternatives, offers anonymity for those who use it. This is exploited by criminals," the consultation paper says.
"Would there be merit in taking some kind of action targeting the $100 note? While an outright ban is unlikely to be effective, an organised changeover (requiring all holders of $100 notes to exchange them for new ones) might be considered. A possible option might be to use tracking technology for a subset of these notes."
The consultation paper likens its cash crackdown to the "paradigm shift" in counter-terrorism efforts following 9/11. "The black economy does not exist in isolation from other social ills," it says.
"Indeed, organised crime and other forms of illegal activity are at its very core. This problem knows no jurisdictional or departmental boundaries, yet in some cases our responses are siloed, fragmented and reactive."
A Treasury spokeswoman said the ideas were "published for further public consultation and are not formal recommendations". "The Taskforce is due to deliver a final report to Government in October 2017," she said.
HOW THEY'RE COMING FOR YOUR CASH
• Reviewing the $100 note: "While an outright ban is unlikely to be effective, an organised changeover (requiring all holders of $100 notes to exchange them for new ones) might be considered. A possible option might be to use tracking technology for a subset of these notes."
• Requiring non-cash payment of wages: "Not allowing deductions to be claimed for undocumented wages (no PAYG withholding payments, no payment summaries issues or no superannuation contributions reported). We are interested in views on taking this one step further by requiring all wages to be paid electronically."
• Cracking down on tradie scams: "We have been told that tradespeople use discount cards to purchase tools and furnish proof for deduction claims, but that part of the income earnt with them is never declared. These cards could be a valuable resource for the tax authorities (looking for mismatches between deductions and income), but also play a role in ethical supply chain behaviour (for example, limiting access to them to tradespeople with verified ABNs)."
• Linking compo to taxable income: "We have been told that workers' compensation payouts are not linked to the amount of income reported for tax. If workers' compensation payouts were calculated based on income reported for tax purposes, that could act as a disincentive for employees to ask for, and accept, cash in hand wages."
• Tax incentives for non-cash businesses: "The idea would be to encourage businesses which are prepared to adopt non-cash business models. This would spur innovation (for example the development of new apps) and require buy-in from customers."
• Possible cash payment limit across the economy: "The anonymity of cash is exploited by black economy participants and those engaged in illegal activity including money laundering, terrorism financing and illicit trade. The level of any cash payment limit will require careful consideration (however $10,000 is a possible option)."
• Lowering the GST threshold: "Given technological developments since the tax was introduced, the view has been put to the Taskforce that the current GST threshold ($75,000) may be too high. We note that any change to the GST must be agreed by the States and Territories."
• Whole-of-government use of data: "A better connected, less fragmented government will lower compliance costs for individuals and businesses, allow services to be better tailored and spur innovation. It will enable more sophisticated use of analytics (including big data) by government agencies, potentially linking data from welfare, immigration, policy and tax authorities."
• Consumer-focused action: "We intend to examine the merits of consumer-focused sanctions, including the loss of consumer protections, warranties and legal rights for people who make cash payments without obtaining a valid receipt."
• Targeting high-risk sectors: "High-risk sectors identified ... include building and construction, restaurants and cafes, hair and beauty salons, child care, disability services, aged care, labour hire, horticulture and abattoirs, and offshore wagering."
• Punishing property owners: "Property owners should take some responsibility for activities that take place on their premises or land. Consideration might be given to sanctions for owners where blatantly illegal activities are involved and some degree of knowledge of these activities (or wilful blindness) can reasonably be imputed."
• Using biometric data: "Biometrics such as fingerprints, palm prints, iris and facial structure are unique physical attributes that can be used for identity verification purposes. The Taskforce will consider whether increased use of biometrics (subject to privacy protections) would assist to reduce black economy participation."
• Snooping on internet traffic: "Germany has introduced world-leading internet 'scraping' technology which monitors internet traffic to identify potentially high-risk transactions. This information is shared with the tax authorities and also internet businesses (including eBay)."
Source: Black Economy Taskforce