In the fight against terrorist financing, drug trafficking, money-laundering and tax evasion, Australia has moved to ban the use of cash in any transactions over $10,000 by next year, moving the Down Under that much closer to becoming a digital currency society.
In a move lauded by Treasurer Scott Morrison as “bad news for criminal gangs, terrorists, and those who just trying to cheat on their tax …”, the government is eyeing the surveillance potential of large transactions made by checks or credit cards connected to banks and hoping to cut down on crime in the process.
The ban will become effective in July 2019, and will not affect transactions with financial institutions or consumer-to-consumer non-business transactions.
To make it work, the government is allocating some $300 million in funds to the ‘Black Economy Standing Taskforce’, and is hoping that the cash ban ends up adding a cool $3-$4 billion in additional tax revenue to government coffers in four years.
“The black economy undermines community trust in the tax system, gives some businesses an unfair competitive advantage, puts pressure on margins of honest businesses, and often includes exploitation of vulnerable employees through the underpayment of wages and loss of entitlements,” Financial Services Minister Kelly O’Dwyer said, as reported by the Guardian.
The cash ban for purchases over $10,000 is of major significance in a country where nearly 40 percent of all commercial transactions are done in cash. According to the Reserve Bank of Australia, 37 percent of commercial transactions were in cash in 2016, down from 70 percent in 2007. At the same time, the value of payments in cash in 2016 was $56 billion lower than in 2007, when it was $162 billion.
Brian Hartzer, CEO of Westpac, predicts that 95 percent of payments in Australia will be electronic within a decade.
But none of that changes the fact that the Australian economy is still notoriously cash-heavy, and one of the biggest problems is the black market for tobacco products. Australia has the highest tax on cigarettes in the world, rendering retail prices close to $40 per pack.
This fact has led to a burgeoning black market for tobacco, including smuggling, leakage from licensed warehouses and illicit domestic production. Right now, tobacco can be imported and stored in warehouses before taxes are paid, opening up a wide window of opportunity to large cash sales of product illegally, lowering taxes paid later.
But for now, try as Australia might, cash still rules the day, even if digital payments are gaining significant ground.
According to the G4S World Cash Report, “demand for cash is increasing globally, based on the rising value of ATM withdrawals and currency in circulation, both in absolute value and relative to GDP.”
In 17 out of 24 studied countries, cash represents more than 50 percent of all payment transactions, while in Europe, it represents 78.8 percent of all transactions in volume and 52.8 percent in value.
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Many European countries have cash limits varying from $1,600 to $4,800. And last year, Sweden hit a new non-cash record, with 59 percent of consumer transactions completed through non-cash methods.
UNSW economics professor Richard Holden was quoted by Australian media as calling for cash to be completely phased out by 2020 because it is a “lubricant” of organized crime. Likewise, Harvard professor Kenneth Rogoff calls cash a “curse” that facilitates all manner of crime from terrorism to human trafficking.
But some argue that because quashing cash is a violation of civil rights.
“At the end of the day it should be the discretion of the person,” one Australian businessman told local media. “If they’ve got the cash and it’s by legitimate means, they should be allowed to buy things with it. It’s legal tender.”
By Josh Owens for Safehaven.com
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