Contractor compliance nightmare will hurt the Government: Gottliebsen

When Assistant Treasurer Bill Shorten was addressing some 700 Canberra accountants and other business people at the traditional after budget breakfast in the Great Hall, he went out of his way to emphasise that good government involved doing research before making big decisions.

And he illustrated his contention with some of the decisions he has made, and is making, which involved careful research. I agree, and my view is this is one of the reasons that decisions coming out of the Shorten camp involving financial planning, institutions insurance and other prickly areas have been generally well accepted.

But Shorten and his boss Wayne Swan should hang their heads over their decision to introduce a bureaucratic nightmare into building (and later IT) contracting by making every contracting business report every payment to the government.

Running a contract business is now a way of life for one million Australians. If there was clear public evidence of widespread tax rorting in building contracting and other areas then maybe such a radical and drastic step could be justified. But the only publicly available detailed research was an audit sweep of 65,000 independent contractors undertaken by the Tax Office in 1998. They issued adjustment notices to less than 750 people and some of those were refunds – that is a very small figure and would not justify the proposed horrendous action against electricians, plumbers, bricklayers, architects, engineers, accountants, etc.

The Tax Office now needs to repeat that audit sweep process and publish the results. If the audit sweep shows an abnormal number of people rorting the system then the case to introduce this bureaucratic nightmare will be a lot stronger. However, my guess is that things have not changed greatly since 1998.

It is true that in the building industry (and other industries) there is a substantial cash business, but making contractors report to the Government their payments to other contractors is not going to reduce the cash content in the building industry. Indeed, I would suggest it will increase the use of cash because the bureaucratic nightmare of being honest will entice many more people to embrace the cash economy.

Bill Shorten and Wayne Swan will disagree, but I believe they have been trapped into hastily making this decision through pressure from the building unions and a poorly researched report by the taxation Board of Review which again simply hadn’t done proper investigative work.

In the last election campaign Tony Abbott did not understand the way Australians have embraced contracting. He had good policies but did not follow through and kept warning the one million Australian contracting businesses that the government was likely to introduce horrendous reporting requirements. Had he done so I have no doubt he would have become Prime Minister. Whether he will grasp the contracting issue between now and the next election remains to be seen but, with a million contractors out there, the ALP is in great danger – particularly if it acts without first revealing proper research.

This article first appeared on Business Spectator.