Another week, another step close to the end of cash down under?
Overnight it was announced that the Australian government was to launch a special taskforce to police the cash economy which is supposedly worth an estimated AU$21 billion a year.
“[Minister for Revenue and Financial Services Kelly] O’Dwyer told the ABC not only is the lost revenue owed to the Australian people for schools and hospitals, but it’s also critical for those who do the right thing and pay tax.
“The whole point of this crackdown on the black economy is to make sure we close down any potential loopholes,” she said. Despite the broad use of electronic forms of payment, Ms O’Dwyer warned there are three times as many $100 notes in circulation than $5 notes.
“It does beg the question, ‘Why?’” she said.”
Elsewhere Mish Shedlock correctly points out:
“It would behoove O’Dwyer to think. People can have 100 pennies in their pocket (each of which is nearly worthless) or they can hold a dollar.
Similarly, people can hold a stack of ten $10 notes in their wallet or they can hold a $100 note.
Mathematically it makes perfect sense that 92 per cent of all currency by value is in $50 and $100 notes.
What the hell does $1 buy these days? Is someone going to carry a wad of fifty $1 notes to go to a movie and buy popcorn?
No Cash Within 10 Years?
Rest assured this will not stop with $100 notes. There will no cash within ten years.”
As usual the rationale for the removal of cash is the same mantra: reduce crime, increase tax collection and reduce welfare fraud. This is nicely packaged up by saying that this revenue was:
“owed to the Australian people and major infrastructure projects, including schools and hospitals.
“Frankly, it is critical for those people who are honest, law-abiding people, who are actually doing the right thing and paying their fair share of tax,” she said.
“Otherwise, fair-minded Australians are going to have to pay more tax as a result of someone not paying the tax they are supposed to pay and that simply isn’t fair.”
Quite correctly Australian libertarian Senator David Leyonhjelm points out:
“the only people who are distressed by the cash economy are the government and the public servants who want to spend taxes”.
“The incentives for a cash economy would be a lot reduced if taxes were a lot lower,” he told news.com.au. “It’s a reaction to the level of taxes we pay.”
Mr Leyonhjelm said Australia was joining a global push to make it harder to engage in the cash economy. “Whether it will succeed or not is a moot point. Carrying two $50 notes instead of a $100 note doesn’t seem to be much of a disincentive,” he said.
“But with my libertarian hat on, I think the solution is to lower taxes so the incentives to avoid paying taxes are lower.”
The news was commented on by alternative media in the USA such as Realist News:
Will New Zealand be Far Behind in Launching a War on Cash?
The question for those of us here in New Zealand is can our government be far behind in launching a similar initiative with a similar rationale of it being for the “benefit of honest New Zealanders”?
Well, in actuality it has already started. Earlier this year the IRD launched a campaign targeting cash jobs by tradies in Auckland. This extended to Queenstown and recently to Christchurch.
Obviously this is only targeting tradies and subcontractors. But we are pretty similar to Australia, so odds are it won’t be too long before further proposals are announced here.
Such as putting limits on the size of cash transactions (most banks already limit these on a daily basis anyway). Or doing away with our $100 note.
It won’t matter who is in government or who is Prime Minister either.
Certainly it makes good sense to have some cash on hand in case of an emergency. Be it a financial one or a natural disaster where power, phone and internet connections go down meaning electronic transactions are unavailable. This way you can still transact for every day goods like fuel and food.
However it might be wise to think about what size notes you keep on hand.
Perhaps go with $50 or maybe even $20 notes rather than the $100? As it might only be a matter of time before our $100 note is banished, obviously to fight terrorists, drug dealers, and tax cheats.
Related content you might like to read: War on Cash – Implications for New Zealand