One Former Australian Bank Official accuses the Elderly of using $100 Notes in Massive Welfare Fraud

Posted by PITHOCRATES - September 29th, 2012

Week in Review

What’s the biggest problem of a welfare state?  Fraud.  Which large piles of money always seems to attract.  As well as changing personal behavior.  Some are even saying it’s turning the elderly into the greatest fraudsters in all of Australia (see Pensioners fume at welfare fraud claims by Henrietta Cook posted 9/25/2012 on The Sydney Morning Herald).

Former senior Reserve Bank official Peter Mair said elderly Australians were committing welfare fraud on a massive scale and are behind the extraordinarily high number of $100 notes in circulation…

Yesterday, BusinessDay revealed there are now 10 $100 notes in circulation for each Australian, far more than the more commonly seen $20 notes…

In a letter to the Reserve Bank governor, Glenn Stevens, dated July 4, Mr Mair laid the blame squarely on elderly people wanting to get the pension and hiding their income in cash to ensure they qualified for the means-tested benefit.

If you have too much income or too much money in the bank you could have too much wealth to qualify for a means-tested pension.  So the former senior Reserve Bank official is suggesting that people close to retirement are withdrawing their money from the bank to draw down their bank accounts to more easily qualify for those means-tested pensions.  And those $100 bills make it easy to hide piles of cash in a pensioner’s house.  Perhaps needing only one well hid suitcase full of $100 bills to hold all of those bank withdrawals.  At least, that is what the former senior Reserve Bank official is suggesting.

Finance Minister Penny Wong has warned elderly pensioners to properly declare their incomes. Senator Wong said today she had “not been looking looking under pensioners’ beds lately”.

“But I would say we have a system of means testing for access to the pension and people are required to declare their assets and their income in order to access them,” she told reporters in Canberra…

Mr Mair said that in 1996 when the green plastic $100 note replaced the grey paper note, the Martin Place headquarters of the Reserve received regular visits from retirees wanting to withdraw large quantities of the new notes. He said the commercial banks had sent them to the Reserve because they did not have enough $100 notes on hand.

Mr Mair said the return for an Australian close to getting the pension who held $10,000 in cash, rather than declaring it, was “enormous”.

“If putting it under the bed or in a cupboard means you qualify for the pensioner card, you get discounted council rates, discounted car registration, discounted phone rental – in percentage terms the return is enormous,” he said.

So there is a clear advantage to hiding your wealth.  Which the high denomination bills allow one to do.  So the obvious solution to this alleged welfare fraud would be to eliminate those high denomination bills.

His letter to the governor proposes phasing out the $100 and $50 denominations.

“Cards and the internet have delivered a body blow to high-denomination bank notes. They are redundant,” he said. “There is no longer any point in issuing them except to facilitate tax dodging. The authorities would announce that from, say, June 2015 every $100 and $50 note could be redeemed but no new notes would be issued. After June 2017 every note could only be redeemed at an annual discount of 10 per cent. It would mean that, after two years, each $100 note could only be redeemed for $80, and so on.”

Or perhaps they could lower tax rates.  If they are using these $100 bills for tax evasion perhaps taxes are just too high.  Apparently there is an underground cash economy solely to evade or mitigate taxes like the GST and the carbon tax.  It would appear they could come out further ahead if they just cut taxes instead of having all of these taxes (and tax enforcement) for a welfare state that people may be gaming.  It would be so much cheaper for people to pay their own way and not provide for everyone else (as well as the environment) through these excessive taxes that people aggressively try to evade.

The events happening in Australia provide an answer to the commonly asked question.  Are we taxed too much?  A question the Australians are clearly answering in the affirmative.  As most people feel who have a GST as well as a carbon tax.

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