CANBERRA, July 16 (Xinhua) -- Companies that deliberately fail are costing the Australian economy billions of dollars every year, a report has found.
According to the Pricewaterhouse Coopers (PwC) report, released on Monday, the act of phoenixing whereby companies are systematically liquidated to avoid tax and employee entitlements only to start anew costs the Australian economy five billion Australian dollars (3.7 billion U.S. dollars) every year.
Of that figure, approximately three billion Australian dollars (2.2 billion U.S. dollars) is lost in debts owed to other businesses.
The report contained an announcement from Kelly O'Dwyer, Australia's Minister for Revenue and Services, that an audit of 340 businesses believed to be involved in phoenixing resulted in tax bills worth 270 million Australian dollars (200 million U.S. dollars) being issued to the offenders.
She said that the practice "hurts hardworking Australians, including the company's employees, suppliers, customers and competing businesses" and is a "significant drain" on the economy.
According to the report, phoenixing cost the economy between 2.9 and 5.1 billion Australian dollars (2.15-3.79 billion U.S. dollars) in 2015-16, 1.7 billion Australian dollars (1.26 billion U.S. dollars) of which was in the form of unpaid taxes.
Employees were robbed of up to 300 million Australian dollars (223 million U.S. dollars) in unpaid entitlements.
Regular taxpayers were hit hard by the practice too with 1.6 billion Australian dollars (1.18 billion U.S. dollars) out of taxes paid in the last decade going to employees of failed companies.
"Successfully combating potential illegal phoenix activity in a cost-effective manner could provide a significant boost to the Australian economy," the report said.
More than one million businesses ceased operations between financial years 2012-13 and 2015-16, the report said, 36,532 of which required the appointment of external administrators following insolvency.
"In most cases, these may have been legitimate and honest commercial failures; in other cases these failures may have been deliberate," the report said.
O'Dwyer announced that a government hotline would be established to "make it easier to report suspected phoenixing behavior."
