Cash will become a niche payment sooner than we think and cheques will be phased out, says Reserve Bank of Australia governor Philip Lowe, as the Federal Government considers imposing tougher penalties on cash economy activity.
On Monday Mr Lowe told the Australian Payments Summit in Sydney that for some decades people have been speculating that we might one day go cashless, and now it could become a reality.
“It looks like a turning point has been reached. It is now easier than it has been to conceive of a world in which banknotes are used for relatively few payments; that cash becomes a niche payment instrument,” Mr Lowe said.
His comments came as Treasury released a discussion paper asking whether the Australian Taxation Office (ATO) should get greater powers to catch out cash economy cheats.
These include increasing penalties against alleged black economy activity and giving the ATO easier and direct access to telecommunications metadata.
It might get easier for the ATO to access your private data
The paper suggests the ATO be given access to third-party information, including data from banks, as evidence to prove “low to mid-range black economy criminal offences”.
For all criminal matters the ATO currently has to rely on the AFP to issue and execute search warrants on banks and other third-party institutions to gather information on behalf of the ATO.
It said the Federal Government should consider using tools such as internet scraping — a tactic currently used by German tax authorities to identify potentially high-risk transactions — to gather data and improve its data analytics to monitor black economy activity.
It also calls for reforms to freezing orders. Currently the Proceeds of Crime Act 2002 allows for complete freezing of bank accounts for up to three days and a restraining order is required to extend it.
The paper also suggests giving the ATO telecommunications metadata such as telephone numbers, name and address details, and itemised call records.
But it notes that doing so “could impact on the privacy of individuals and businesses subject to criminal investigation, as the [Tax] Commissioner would have the powers to review data not linked to joint AFP investigations”.
Call to increase ATO powers to fight black economy
The paper, which is out for consultation until December 21, also suggests “targeted new offences for black economy activities that fill the gaps in the existing enforcement regime” and boosting existing offences and penalties for tax-related crimes.
It asks whether the onus of proof — that someone is innocent until proven guilty — should be reversed for serious black economy offences relating to terrorism, drugs and child sex offences.
“This could potentially improve the likelihood of aggressive and serious black economy offences being successfully prosecuted and act as an effective deterrent,” it said.
The paper suggests a broader range of sanctions should be adopted, going beyond monetary penalties or criminal sanctions. For example, visa forfeiture and travel bans for individuals, and preclusion from bidding on government procurement contracts for companies.
But it also warns that while financial penalties and criminal proceedings “can be adequate incentives to comply with the tax system, they may not be effective for the entire population”.
Electronic payments rise, bank cheques fall
The proposal to increase penalties against cash economy activity comes as Australia moves towards a cashless world.
The RBA says Australians now make, on average, nearly 500 electronic payments a year, up from around 100 per year around the turn of the century.
There’s also been a decline in the use of cheques — from 45 per person in the mid-1990s to three per person in 2018.
“Given this trend is likely to continue, it will be appropriate at some point to wind up the cheque system, given the high fixed costs involved in operating the system,” Mr Lowe said.
“We have not reached that point yet, but it may not be too far away.”
Despite the decline in cash use, the value of banknotes on issue, relative to the size of the economy, is close to the highest it has been in 50 years. For every Australian there are currently around thirty $50 and fourteen $100 banknotes on issue.
Mr Lowe said the main explanation is that some people, including non-residents, choose to hold a share of their wealth in Australian banknotes.
RBA supports a ‘digital identity’
But overall, the shift to electronic payments that is occurring “makes a lot of sense — it is similar to other aspects of our lives where things that used to be physical have been supplemented with, or replaced by, technology”.
“This shift is likely to promote our collective welfare,” Mr Lowe said.
In this light, a priority for the industry is to progress work on digital identity.
“Digital identity is likely to become increasingly important as more and more activity takes place online,” he said.
“The RBA is highly supportive of industry collaboration on this issue and views it as important that substantive progress is made.”