Navigating Regulatory Grey Areas: An Opportunity for Innovative Business Models
Added on 2019-10-31
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Taxation Law & Practice
Table of ContentsIntroduction:....................................................................................................................................3Task-A:............................................................................................................................................3A discussion on the concept of “the black economy”.....................................................................3A discussion on the concept of “sharing economy”........................................................................4Task-B:............................................................................................................................................5Business operating under “sharing economy”.................................................................................5Business operating under “traditional business model”..................................................................6Task-C..............................................................................................................................................7Proposals or initiatives expected to be successful in reducing the contribution of the sharingeconomy to the problem of the black economy...............................................................................7Conclusion:......................................................................................................................................9Reference:......................................................................................................................................11
Introduction:This assignment addresses the underlying reasons behind the development of Black Economy inAustralia. The assignment also points out the negative impact of the presence of a blackeconomy over the tax structure and the regulatory framework of the country and how it ishampering the economic growth of the country (McGee, 2011). The assignment also points outthe operations of the business models that are working under “sharing economy” and how theyare affecting the Australian Economy. Finally the assignments describes the initiatives andprograms that are under taken by the different governmental authorities to restrain the negativeimpacts of black economy and sharing economy in relation to the problem of tax evasion whichis badly affecting the Australian economy.Task-A:A discussion on the concept of “the black economy”The black economy of a nation can be defined as an untraceable economy which runs parallelwith the economy whose financial transactions are traceable or known to the government andtherefore are reflected in the GDP calculation of the country. Thus the records of the financialtransactions of the black economy are kept hidden and therefore these transactions are notreflected to the GDP of a nation. As a result, these transactions remain away from the taxnetwork of the country. Therefore the presence of a substantial volume of black economy in acountry is detrimental for the health of the economy of that country. The presence of blackeconomy leads to tax evasion as well as sever violation of the corporate regulatory framework ofa country. The presence of black economy deprives a nation from the earnings of the required taxrevenue as tax cannot be charged on those transactions that are not deliberately reported to thegovernmental authority (Schneider,2012). The black economy is also referred as the shadoweconomy or underground economy as the financial operations & tax obligation of this economyis not reported to the governmental authority with the required transparency.Measuring the actual size of black economy is extremely difficult as the operations andtransactions of the economy are kept hidden from the governmental authority. According to the
estimates of ABS [Australian Bureau of Statistics] in 2012 the size of the black economy wasaround 1.5% of the GDP of the country which refers to an approximate size of 25 billionAustralian dollars per annum (Black Economy Task Force, 2017). The most common nonreported transactions of the underground economy of Australia are the cash payments made forgoods and services, the cash payments made for the illegal activities and cash transactions donefor paying the employees of an organization(Schneider, 2013). The largest component of theAustralian underground economy is the “Underground production” that amounts to $ 22.7billion. The “Underground production” refers to those transactions that are legal in nature but isdeliberately kept hidden from the financial authorities of the country to evade tax. The other twosignificant components of the Australian “Black economy” are the “Household production &Usage” [AUD $2.8 billion] and” illegal drugs”[ AUD $5.6 billion].The Australian TaxationOffice[ATO] is employing stringent initiatives and programs to crack down over the blackeconomy of the country and is determined to fetch back an amount of AUD $ 600 million fromthe black economy of the country.A discussion on the concept of “sharing economy”The sharing economy can be defined as an existence of an online platform where the buyers and sellers are getting the opportunity of making direct contact with each other and thus the transaction cost that has to be incurred for going through the intermediaries can be saved. The emergence of the sharing economy has become possible due to the development of the information and the communication technology that has made it possible for the buyers and sellers from any location to meet with each other for completing a business deal. The parties to a business deal in the sharing economy are either small businesses or the individuals. The presenceof the sharing economy offers a platform that enhances the benefit of coordination between the buyers and sellers of a business deal. The platform delivers the opportunity of negotiation for each separate deal(The sharing economy and the Competition and Consumer Act, 2015). Thus an important aspect of sharing economy is the involvement of the online transactions in the social and economic activities. The sharing economy also implicates to the peer to peer based sharing access of the goods and service (Weber,2014). The sharing economy enhances collaboration between the buyers and the sellers that is why the concept is also reoffered as the collaborative economy or collaborative consumption.
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