You won’t hear politicians say this, but one of the more robust sectors of the Australian economy is the creative industries. And because of COVID-19, with people forced to stay home under health directives, content creation has boomed.
But the inability to formulate a comprehensive tax policy for the creative industries over the last 25 years (since an attempt was made by the Hawke-Keating governments of the 1980s and 1990s), during which time the development of the internet, cryptocurrency and social media platforms has transformed the sector completely, has resulted in some unsavoury outcomes.
The latest of which is a tax scandal promulgated through TikTok which encourages users of the popular app, many of whom are on welfare or have no fixed address, to pretend they are in business and lodge fake activity statements to generate GST refunds, with the average amount being paid out being $20,000.
The fraud has been promoted on TikTok as a way to access ATO ‘loans’ or to receive other government financial support such as disaster payments. Of concern are advertisements promoting access to ATO payments by requesting user’s myGov logins.
The number of people who, knowingly or unknowingly, are involved in this tax scandal is staggering. According to the ATO, as of the end of September, it has stopped 40,000 claims worth more than $2 billion. However, hundreds of millions of dollars have been paid out to thousands of people and the fraud continues to evolve. A new variation of the scheme was uncovered by the ATO last month.
Our twentieth-century tax system is not engineered to counter twenty-first century attacks on its probity. Division IVA, Income Tax Assessment Act 1936, addresses tax benefits obtained as a result of schemes that have the sole or dominant purpose of producing such benefits. But it is hard to see this legislation being used to prosecute 70,000 or more people.
GST refunds for newly established businesses are important for cash flow purposes, but there must be a better way of identifying whether a business exists than a simple declaration that that is the case. In the arts industries, it is often unclear when a business actually commences, when its character changes from a hobby to something more substantive.
The perpetrators of the TikTok fraud are taking advantage of the uncertainties surrounding business establishment and the validity of arts organisations by cynically asking people to pretend they are content creators.
The ATO has created Operation Protego, by working with banks and an AUSTRAC-led coalition of law enforcement and financial industry organisations, to stamp out the fraud. Ironically, for an organisation with historically little interest in the creative sector, the ATO is also now watching a lot of social media.
And perhaps this is the central issue of the scandal – a need to take the creative industries seriously in Australia. The square peg in a round hole approach needs an overhaul.
Featured Image: Murray Walker, The Bunny Dance Berlin, 2010, watercolour and Indian Ink on paper, 21 by 14 cm