The introduction of the Goods and Services Tax (GST) in July 2000 by the Howard Government was, we were told, likely to lead to a significant reduction in the size of the ‘cash’ or ‘black’ economy. The 2003 report to the then Tax Commissioner from the Cash Economy Task Force stated: The new tax system contains many features designed to increase the integrity of the tax system and to assist the Tax Office in effectively identifying and addressing non-compliance, including evasion in the cash economy. Indeed, the report went on to find that: The Task Force sees strong signs that these measures are impacting significantly on the cash economy. The design features of the reformed tax system are working together to produce a more robust tax system that is harder to evade. However, in recent years there has been growing evidence that the size of the cash economy remains significant as employer and employees seek to avoid a range of tax obligations. For example: •The Australian Tax Office warned 30,000 businesses during 2010-11 about the possibility that they were under-declaring their income. •The ATO received an average of 164 tip-offs per week relating to concerns about the cash economy. In 2010 the Commonwealth Government invested an additional $445 million in the ATO’s capacity to collect revenue from the cash economy, an investment that was expected to recoup $3.2 billion in additional revenue. In recent months there have been a number of calls on the Commonwealth Government to collect more GST revenue, all of which is passed onto the States. The NSW Premier, for example, has called for consideration of an increase in the rate of the GST, while the National Retail Association (NRA) has linked the need to collect GST on imported goods worth less than $1,000 with the capacity to collect an additional $800 million per year in GST revenue. As the following analysis shows, however, a crackdown on the black economy and cash-in-hand work has much greater capacity to equitably and efficiently increase Commonwealth and State Government revenues. Indeed, it is likely that if the government were to increase the rate of GST or attempt to broaden its base, it would lead to either increased avoidance activity, increased administrative cost of tax collection, or both.