April 7, 2017 / 7:58 AM / 4 months ago

Dog walkers, hairdressers on tax to-do list as Australia's black economy grows

The Sydney Harbour Bridge is reflected in the window of a hair salon as a model gets her hair styled before the Manning Cartell catwalk show at Australian Fashion Week May 17, 2016.Jason Reed/File Photo

SYDNEY (Reuters) - Australia is looking to target "high risk" tax avoidance sectors such as dog walking and mobile hairdressing and enforce a threshold on cash transactions as it clamps down on its A$25 billion ($18.8 billion) black economy, a top official said on Friday.

Australia's booming services sector, which accounts for about three-quarters of the country's A$1.7 trillion economic output, was more prone to black money activity, said Michael Andrew, chairman of the Board of Tax, which advises the government on tax policies.

Andrew is also chairing Australia's "Black Economy Task Force" and filed an interim report to the government last week, in which it made proposals to attack rising illicit cash use.

"If you look at the whole industry now that is servicing people out of their home, whether it's mobile hairdressing, dogwalking or childcare, they are the high-risk sectors," he said.

Australia has made plugging a yawning budget deficit and boosting income a priority following the end of a once-in-a-generation mining investment boom. It is expected to announce measures to claw back lost tax revenue at its federal budget in May as inertia on its part could lead to a damaging downgrade of its top credit rating.

"We actually thought with all the technology and the move to digital wallets, we'll see a fall in the cash economy. We've actually seen the reverse," Andrew said by phone.

He identified real estate, jewellery and car dealers among industries vulnerable to hefty cash transactions.

"We're looking at making it illegal to do cash transactions after a certain amount. Let's say have a A$10,000 ($7,530) threshold."

Other proposals in the interim report include monitoring supply chains of larger businesses to ensure they deal with registered companies having robust tax records.

It is not clear yet whether the government will make the interim report public. A spokesman for the minister of revenue and financial services told Reuters a decision had yet to be made.

Andrew noted part of the problem was a rising number of people from overseas unsure about the rules.

"We have a lot of people who come from countries where they don't trust the banking system, the tax system or the government. And that's the way they do business.

"Part of our proposal is to spend a lot of time with these communities... making sure we have Mandarin explanations when people start businesses or have translator services ready when people contact the tax office."

Australia is home to one of China's biggest offshore communities, with more than a million of the country's 24 million population either Chinese-born or identifying as having Chinese heritage.

($1 = A$1.3277)

Reporting by Swati Pandey; Editing by Nick Macfie

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