The federal government is urgently preparing new budget measures to deal with the explosive growth of the online economy, as Scott Morrison vows to confront the growing pressure on tax revenue.
The plans include a pilot program to put more government services online as Australians increase their digital payments to more than 10 billion transactions a year, while scaling back their use of cash and cheques.
After creating a “Google tax” to stamp out tax avoidance and a “Netflix tax” to capture more online purchases, the government is drafting a wider digital agenda for the year ahead in the hope that the shift away from cash could shore up the integrity of the tax system.
“You’ve got to make sure your tax base is just not comprehensive but make sure it is modern,” the Treasurer told The Australian.
“That’s not a criticism of anything previously, but you’ve got to make sure it is keeping pace with the digital economy.
“The tax system will have to change to embrace the new world order when it comes to technology and how people are consuming services. There’s a big upside to that as well in how you are dealing with the black economy.”
The government is hoping to use the permanent shift to online and mobile payments to improve tax collections by working on a financial technology agenda where transactions are harder to hide from the Australian Taxation Office.
Mr Morrison will meet his counterparts from G20 nations at a forum in Germany this month to outline the Australian “fintech” ambitions, declaring he would be “forward-leaning” on ways to deal with the transformation in the economy. “We want to be at the front of the pack on this and we want the rest of the G20 economies to know we’re there too,” he said.
Labor has blamed the Treasurer for being too slow to combat tax avoidance and has accused the Coalition of scaling back Wayne Swan’s proposal four years ago to generate $1 billion a year from tougher rules on big companies.
The government has vowed to defend the tax system with two measures due to start this July — a “Google tax” raising $200 million over four years to capture profits that are diverted overseas and a “Netflix tax” to raise $350m by ensuring GST is paid on digital products and services.
The government has also started a project to target the “black economy” and raise revenue from transactions that used to be done in cash, in parallel with the fintech agenda, to adapt to digital currencies such as Bitcoin and prepare for wider use of “blockchain” protocols used in a new wave of transactions.
While “cash was king” in the past, Mr Morrison said, consumers now wanted to use digital forms of payment such as Apple Pay. “The thing about the digital economy is it’s all automatic,” he said. “I liken it to the transformation that occurred with the GST that greatly assisted small business to understand their cash flows, which was always sold as a by-product of that system’s change to tax.
“I would expect that we would see a similar productivity improvement, particularly at the smaller business, where they’re able to use payments systems that are automatically connecting.”
An example of the shift is the Reserve Bank’s move to an updated payment system that will replace “bank-state-branch”, or BSB, numbers with new identifiers, conceivably a consumer’s mobile phone number.
“That will be followed by another consumer leap when they become familiar with the opportunities for them and the convenience. That hopefully will shine more light on the entire economy,” Mr Morrison said.
An “open data” approach will mean consumers have more control over their accounts and may be able to move between banks more easily, or allow an insurance company to get instant access to personal information in order to customise a policy.
The Productivity Commission is examining whether privacy rules should change so customers can control their personal data and use it to extract more competition between providers. The final report will go to Mr Morrison this year.
The result is expected to make tax collection more efficient because more transactions will be online and verifiable in real-time.
The political furore over Centrelink’s data-matching program has highlighted the difficulty of going to welfare recipients years after their benefits were paid to check on discrepancies in data held in multiple systems because some of it was provided manually in the past.
Mr Morrison is waiting on proposals from the Data 61 unit at the CSIRO to develop ways for the government to use blockchain technology to provide services to citizens, proving the use of a distributed network to complete transactions without the centralised role of the banks.
The government’s goal is to include this program in the May budget. Driving the agenda is the hope that it will be faster, simpler and more accurate for consumers to exchange information and complete transactions in an “open data” world — while being a boost for tax integrity as well.