Black Economy and Phoenixing: An Analysis of the Taskforce Report

Running head: CORPORATE LAW
CORPORATE LAW
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Introduction
In this essay a detailed analysis has been done on the Black Economy Taskforce Final
Report released in October 2017 by the Government of Australia following an initial
investigation by the Board of Taxation, supported by Treasury and the ATO. The report can be
seen as dealing with the development of a strategy for combating the black economy. In the
current essay a research has been done in relation to black economy and phoenixing. In
furtherance this essay answers the following questions- the estimated costs to the Australian
economy of phoenixing, the industry in which phoenixing is prevalent mostly, the difficulties in
pursuing the entities in phoenixing, the warning signs for the assistance in the early identification
of the phoenix activities and the recommendations identified for addressing the increase illegal
phoenix activity in Australia. The term ‘black economy’ refers all the people who operate
outside the taxation and the legal system. Phoenixing is the operations of the business of an
individual structure of a company who take out all the assets and profits earned from the business
by way of moving them to other entities and start doing business through to be help of those
entities.
Black Economy
The term ‘black economy’ is used to be referring all the people who operate outside the
taxation and the legal system. The authorities can be seen as having knowledge about them but
their tax obligations are not correctly reported. Black economy is seen to be consisting of a wide
range of practices. These practices include welfare frauds, understatements of the takings,
accepting and paying cash wages that are off the books, moonlighting, the abstinence of the
contractors in a sharing economy from the declaration of their incomes and phoenixing.

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Phoenixing can be defined as the operations of the business of an individual structure of a
company who can be seen as taking out all the assets are profits earned from the business by way
of moving them to other entities and start doing business through to be help of those entities.
Black economy is also termed as cash economy, shadow economy and underground economy
(Treasury, 2019). As per the report black economy also includes complex interactions with
illegal activities, like money laundering. According to the report of the task force the black
economy can be seen as a significant Complex and growing economic problem and a social
problem as well. Believe the task force is that the problem could have increased up to 50% since
the year 2012. With the changes in economic technological and social sectors the black economy
can be seen as rapidly shifting and evolving and not standing still.
Phoenixing
Phoenixing can be defined as the operations of the business of an individual structure of a
company who can be seen as taking out all the assets are profits earned from the business by way
of moving them to other entities and start doing business through to be help of those entities.
Phoenixing is seen to involve the transfer of assets in an intentional way from a company that
has been indebted to a new company for avoiding to pay the creditors, tax or employee
entitlements. The activities of phoenixing was seen as being discussed in the case Australian
Securities and Investment Commission v Somerville & ors [2009]. Phoenix activities can be seen
as an emerging and serious problem undermining the confidence of the community in the
corporate regulations. Taxpayers have to bear the ultimate burden of the revenues that have been
reduced. In furtherance, business operators becoming insolvent in an intentional and repeated
way are seen as cheating the trade creditors and employees and undercutting the legitimate
operators.

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Question 2
Estimated cost
In 2012, as per the estimations of the Australian Bureau of Statistics (ABS), the
‘underground production’ or the ‘cash economy’ was seen as accounting for 1.5% of the Gross
Domestic Product (GDP) of Australia that would be amounting to $25 billion in an approximate
manner. In the final report of the Task Force the estimate was found out to be almost 3% of the
GDP which would be equal to the amount $50 billion in the year 2015-16. The Budget of 2018-
19 are building on these measures and implementing a few of the recommendations of the
Taskforce that can be seen as being contained in the final report, which includes- a limit of
$10,000 in an economy-wide manner for those payments made to the businesses for goods and
services in cash in effect from 1st July 2019; an amount of $12.3 million to the treasury over five
years for managing the entire Government response to the Final Report of the Task force; an
amount of $3.4 million to the ATO over four years for leading of the multi-agency of Black
Economy Standing Taskforce; $318.5 million over four years for the implementations of the
strategies for the establishment of the ‘mobile strike teams’ of the ATO and the establishment of
a hotline for the black economy to be used by the public for reporting activities related to the
black economy and the activities related to the phoenixing; an amount of $9.2 million for the
development of a ‘Procurement Connected Policy’ that would be requiring for the businesses to
be providing a statement of the tax compliance from the ATO for any tender for the procurement
contracts of the Australian Government for the amount of over $4 million (Aph, 2019). In an
estimation it can be said that the phoenixing activity costs to the federal government over $600
million per year, the activity adversely affects the businesses in an average of between $0.99 and
$1.93 billion. The effect it has on the employees range to an average of $126 million. As per the