Size, Causes and Consequences of the Underground Economy

Chapter 13Recent Government Initiatives in Tackling the Underground Economy in Australia*

Christopher Bajada

Introduction

In July 2000, Australia undertook a major step in reforming its tax system by introducing a Goods and Services Tax (GST). This tax replaced part of the government’s revenue from its indirect tax with an across the board tax on most goods and services. The GST is a broad based tax set at 10 percent of sales or supplies and borne by the end consumer. So although the GST is paid at each step of the supply chain, each business registered for the GST is able to claim an input tax credit, implying that the GST flows along this supply chain until it reaches the end consumer who is not entitled to claim an input tax credit on purchases. ...