Rorting has become so embedded in Australian life, only a national revival of ethics can hope to turn the tide, writes Michael Smith.
THE AUSTRALIAN national sport of rorting should be on the agenda at the Jim Chalmers economic summit.
Rorting in all its forms costs Australia the equivalent of perhaps 10 per cent of GDP. Putting a big dent in the rorting would create a big boost in per capita GDP, help pay for more services and allow tax cuts.
The Federal Government’s Fraud Prevention Centre estimates that fraud is costing the Government $100 million a day. That’s enough to pay off the national debt in quick time.
And that does not include the losses suffered by the private sector and individuals when rorters strike.
The “black” or “shadow” economy, including undeclared income, is estimated by the Australian Tax Office (ATO) to be 5.3 per cent of GDP in 2022. It costs the ATO $44.5 billion in revenue a year, based on 2022 figures. But that’s only part of the rorting.
Few sections of society can resist the rort. Some doctors were quick to pounce on Medicare when it was introduced in the 1970s and medifraud remains a live issue. More recently, the National Disability Insurance Scheme (NDIS) has become a target for rorters, sometimes on an industrial scale.
The recent GST scam cost the ATO $2 billion, and at least two tax officers and other former ATO officials were involved. More than half the GST fraudsters were welfare recipients. Banks have scammed hundreds of millions of dollars in fee-for-no-service scandals and, more recently, placed disadvantaged customers in high-fee accounts. Too many politicians rort their travel allowances and other expenses.
Small businesses encourage cash transactions that become undeclared income. Too many failing businesses engage in “phoenixing”, where they are deliberately liquidated to avoid paying the ATO, creditors and employees, then rebirth under another name.
These community leaders set a terrible example for the rest of the population suffering from cost of living pressures caused by price rises from businesses and tax hikes by government.
Who amongst us has resisted an offer from a tradie to reduce the cost in return for cash? That makes us accessories to rorting. And is there a train traveller who has not seen widespread dodging of swipe payment systems at suburban stations?
Pandemics and economic crises lead to more fraud, according to international evidence. That explains why there were reports of individuals, businesses and health care professions ripping off the COVID payments system. Relief programs established after floods and fires are plundered by a small number of vultures.
These are not victimless crimes. Every dollar rorted is a dollar less for schools, hospitals, roads, tax relief and debt repayment.
The digital revolution is multiplying the methods and opportunities for rorters. More than 1.8 million people lost $2.2 billion in credit card fraud in 2022-23, according to the Australian Bureau of Statistics (ABS).
Australia boasts an admirable social safety net and was a pioneer in implementing the aged pension and invalid pension more than 100 years ago. Dozens more benefits have been introduced since World War Two. A growing percentage of Australians receive some kind of welfare payment as the population ages. The growth of the welfare state provides more opportunities for a small percentage of citizens to rort the system. But the cost is great.
Treasury and the ATO say the rorts penalise honest taxpayers, undermine the integrity of Australia’s tax and welfare systems and create an uneven playing field for the majority of businesses and people doing the right thing.
A statement on the Treasury website says:
‘If left unchecked, shadow economy participation can lead to a dangerous dynamic. It can foster a culture which legitimises and supports this participation, spurring its further growth. As revenues fall, those remaining in the formal economy may be faced with higher tax burdens, providing a greater incentive to move into the shadows.’
Welfare overpayments, including fraud, were estimated at $3.5 billion a few years ago.
After the Robodebt disaster, Canberra will be reluctant to introduce welfare fraud measures that risk similar overreach.
Technology has been an imperfect tool for the ATO for more than a decade. It was originally the great hope for fraud detection and it replaced thousands of real-life tax investigators. But it has failed to make a big difference as the ATO faces continued criticism from the Auditor-General and the Australian Public Service Commissioner. Centrelink is experimenting with AI, but it is coy about whether or how it will be used.
The fundamental problem is a breakdown in ethics or moral codes. The church has lost much of its moral authority because of child abuse scandals, so there has been a crash in church attendance and respect.
Eliminating rorts is a Utopian fancy. Reducing and preventing it should be a national priority. Investigating, prosecuting and punishment is only part of the solution.
We need better ethics. They should be taught in schools. Parents should imbue their children with ethical values. Businesses and organisations should embrace them in all their activities. And our politicians, community leaders and the media should talk about them more.
Michael Smith is the chief executive and joint founder of Inside Public Relations. He is a former editor of The Age and has 45 years of experience in journalism and public relations.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
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