Accountants, lawyers in the spotlight over billion dollar “black economy” concerns

SMEs in the legal and accounting sectors have been given plenty to think about this week with an assertion from the head of the black economy taskforce that accountants and lawyers are contributing to lost tax revenue through clients skirting tax obligations.

Fairfax reports Michael Andrew, who chairs the taskforce established by the government is 2016 to fight tax avoidance by businesses and individuals estimated at more than $20 billion, has said Australia needs to be “tougher” on those assisting clients to make fraudulent tax claims.

Andrew said some professionals in these spaces either help clients make claims that aren’t correct, or “are blind to technologies and systems used in the black economy”.

Small businesses across several sectors have so far been identified by the government taskforce and the tax office as potentially contributing to lost revenue, including hairdressers and cafes, small cash-heavy businesses and the cleaning and courier sectors. 

Senior tax counsel at The Tax Institute Professor Robert Deutsch tells SmartCompany that any accountants knowingly assisting clients to avoid tax obligations are playing with fire.

“Registered tax agents have ethical obligations and a code of professional conduct to adhere to. If there are tax agents assisting their clients in making fraudulent claims or turning a blind eye to actions their clients might be taking in the black economy, they are seriously risking forfeiture of their licence to act as a tax agent,” Deutsch says.

When Andrew released his interim report on the black economy in May, he made it clear the approach would leave few sectors free of scrutiny.

“Traditional enforcement approaches, which focus on symptoms rather than cures, will not fix this whole-of-government, whole-of-society problem,” he said in May.

The taskforce’s interim report flagged a number of issues it will consider in more detail when making its final recommendations in October, including the possibility that consumers, as well as business owners and operators, could cop more for contributing to the problem of lost revenue.

“We intend to focus on 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,” the interim report suggests.

There will also be a strong focus on a range of other “high-risk” sectors in the final report, with the taskforce so far marking hair and beauty services, restaurants, aged care, labour hire, horticulture businesses, abattoirs and child care operators as other areas of focus.

Submissions on the interim report will be accepted until July 31. 

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4 years ago

Tax evasion is illegal. Tax avoidance is not. No one is obliged to pay more tax than their statutory obligation..

4 years ago
Reply to  wormseye

the issue isn’t avoidance its actually evasion that accountants & lawyers are assisting clients with. From first hand experience its rampant.

Michael Kaff
4 years ago

I had situations in the past where I refused to do as a client asked because it was illegal.

In one instance a lady asked me to blatantly lie for her for by omitting some income, even though it was a traceable and cross-referenced through the PAYG system.

I refused and told her to go try other Tax Agents in the immediate area, which she did, expecting that she would get the same response.

A little later I was talking to one such tax Agent who confirmed that the client in question had gone to him and asked that he cheat on her return. To my amazement and surprise he said he did what she asked, knowing it was illegal and improper and that it would contravene his legal obligation to prepare the return accurately and within the laws of the day. I immediately lost respect for that Tax Agent.

Just because you sign a declaration saying the return was prepared on the basis of information supplied by the taxpayer, you still have a legal and moral obligation to do the right thing. That does not exempt you from prosecution or penalty, as many tax Agents have found out.

He wasn’t the only one I came across who would do anything for a “buck” and for the client.

On another legal matter, I once had a lawyer say “I’ll lie for you” when negotiating a house purchase. I never went back to him.

I can’t understand how someone’s moral and fiduciary compass can go haywire when it comes to money and winning clients. Is it really worth losing your livelihood for a few bucks? How did you sleep at night?

I can sense the smirks and overconfidence of some that will read these words, thinking they are untouchable. Fortunately the ATO is on to this and much more!

Be careful people, it’s not worth it to lose everything, including your reputation and dignity, for so little.