Abstract
The black economy—also called the hidden, covert, underground, grey, illicit, or cash economy—is used to describe the aspect of a country's economy that is not visibly subject to taxation. However, it is also a useful measure of behavioral disruption to the taxation system, as the scale and tactics of black economy participants vary over time. The purpose of this chapter is to suggest that existing tax policy (where legal constraints alone are used) is insufficient to affect black economy behaviour. It suggests that by adopting responses that are “more than law,” revenue administrations can deploy a more advanced and effective approach to improve tax compliance and can decrease the negative impacts of the black economy.
TopBackground
Simplistically, tax is revenue paid or collected by a government in exchange for the provision of vital social and community services, such as hospitals, roads, education and defence (ATO, 2020). The most common form of tax is income tax, where a certain percentage of the income of a person is remitted to the Government; however, there are other forms of taxation like duties or excise that may arise from the sale of goods, business transactions, or from the import or export of goods between countries (Rafay & Ajmal, 2014).
In Australia, the Commonwealth Parliament draws legislative power for taxation from section 51(ii) of the Australian Constitution, which vests the Commonwealth Parliament with exclusive jurisdiction to make laws relating to taxation matters. Table 1 shows certain other sections of the Constitution which place limits on how the Parliament may enact these laws.
Table 1. Examples of constitutional limitations of Australia’s taxation power
| Section of the Constitution | Legal and Practical Effect |
| 55 | Taxation laws in Australia may only be made with ‘one subject matter’ |
| 99 | Taxation must be uniform and not favour one State or Territory over another |
| 114 | Taxes may not be imposed on property belonging to the Commonwealth, States or Territories |
Key Terms in this Chapter
Black Economy: Dishonest and criminal activities that take place outside of or involves misuse or abuse of the tax and regulatory systems.
Regulatory Disruption: The disconnection of criminal law regulators from their statutory or political objective.
Tax: The revenue collected by a government on income, sales, goods and services, or other transactions to fund public spending initiatives.