‘Cash Only’ is a common practice in restaurants, café and some stores.
The method of ‘Cash Only’ varies among restaurants. Some are purely ‘Cash Only’. They only accept cash payment regardless how much money you spent in their restaurants. Also, some are ‘Cash Only’ based on minimum payment. That means that you can pay by card if you ordered over certain amount, otherwise you can just pay by cash.
Have you ever met this situation? When you finish your meal at restaurant and go to counter to pay the bill, but they tell you ‘Cash Only’. Then you have to take your card and rush out of the restaurant to look for ATM to withdraw the cash in order to pay for the meal. All of these just because the restaurant or café refuse that you pay the bill by card.
When you complain this annoying rule to your friends, have you ever thought about the reason behind the rule? why they insist on ‘Cash Only’ even though they are likely to lose a large number of costumers and greatly reduce customer satisfaction?
Professor Celia Sai-Teng Tang, who teaches Taxation for Business Decision Making in Melbourne University, said “business may, for a variety of reasons, choose to accept cash from customers only e.g. to avoid paying banks fees for accepting EFPOS and cards.”
Indeed, a owner of popular Asian restaurant in Melbourne, Mr. Wang (assumed name) says the same reason as Professor Celia Sai-Teng Tang said, “using card will generate the extra fees. Cash only can save this part of expense.” He said “MasterCard and Visa will charge 1.7 per cent fee on each credit card transactions.”
‘Cash Only’ can benefit these small businesses with limited budget. It is understandable that cash payments can help them to save some unnecessary expenses like the fees charged by bank when customer pay by card.
Also, it ensures that small businesses receive funds immediately.
For some small businesses, they don’t have enough funds to turnover. Card payment result in a longer payback period or can’t get the paid for some reasons. However, ‘Cash Only’ can guarantee that the business immediately receives the appropriate payment amount without the worry of waiting periods or not getting paid at all. For this reason, Cash only will be a good practice to maintain the business.
However, does ‘Cash Only’ just for these reasons? The answer will be negative, since there is another function of ‘Cash Only’ for some businesses.
In Melbourne China town, the street is not very wide, but there are many restaurants along both sides of the street. A large number of cash pour into this area every day. That’s because the rule of ‘Cash Only’ made by these stores or restaurants. When you walking into these restaurants, you will find that most of them require customers to pay by cash if the bill less than certain amount, mostly less than $30. Some of them prohibit card payment completely. Similarly, some restaurants in other areas have the same situation.
The practice of ‘Cash Only’ is quite inconvenient for customers, which would result in losing a large number of customers for the stores and restaurants.
“Sometimes I really want to go to my favorite restaurant, but when I found I don’t have cash and the restaurant is ‘Cash Only’, I have to change to another one even though I don’t want to, since I have some more important thing to handle with, and I don’t want waste my time in finding an ATM” a graduate student of Melbourne University Gini Zhao said.
She said that “it doesn’t mean you can pay through card if your order is over $10 or $20. Some restaurants only accept cash payment even if your bill is over $100. I can’t always bring too much cash. It’s not safe and inconvenience.”
Many costumers have the same situation like Gini met. In contemporary society, different bank cards, like credit card and debit card, has become a major means of payment. It is more convenience and safer than bringing cash, and more and more people prefer card payment.
‘Cash Only’ would be a barrier of consume for consumers. This will lead to these restaurants losing a large number of customers by only accepting cash. As card payments become increasingly popular, many consumers expect this to be an option when they pay their bills. If they find that a particular restaurant only accepts cash, they may feel inconvenienced and consume elsewhere.
Although ‘Cash Only’ will cause losing customers, they are willing to insist on this practice. So, there must be another reason behind the practice of ‘Cash Only’.
Mr. Wang said at his unveiling, “Cash Only is a method to avoid paying the income tax. We don’t need to report the part of ‘Cash Only’ in sales revenue when we declare the tax.”
That makes it clear, one of the most popular Melbourne restaurant’s owner explained that directly for us. The main motive for many of these restaurants accepting Cash Only is trying to avoid declaring tax.
‘Cash Only’ not only is inconvenient for customers, but also potentially lose a large amount of tax revenue for Australian government. Apart from that, it will be unfair competition if some businesses illegally avoid paying the tax through the practice of ‘Cash Only’.
Does this practice illegal?
“All proceeds received from customers for buying the restaurant’s food, products or services would be ordinary business income,” Professor Celia Sai-Teng Tang said. “All income should be declared to the ATO (Australian Taxation Office). It is not legal to not declare business income received in any form, directly or indirectly under s.6–5 ITAA 1997.”
‘Cash Only’ would be a big part of income for these businesses.
Some drink stores, like Gong-Cha, don’t accept any kinds of card payment, which means that all income will be cash. Only in Melbourne city center, there are four Gong-Cha drink stores. It’s hard to count their daily income due to ‘Cash Only’, therefore, the ATO is difficult to know whether they pay the right amount of tax.
In addition, almost all Asian restaurants in Melbourne city center area are ‘Cash Only’. We can’t deny that some ‘Cash Only’ restaurants don not attempt to evade paying taxes.
As AFR.com reported in 2014, ATO cracks down on cash economy, senior assistant commissioner Michael Hardy said in the report “there’s nothing wrong in operating in cash . . . as long as it declares the income.”
However, how could the government know whether or not they declare all income including cash. If majority of ‘Cash Only’ restaurants are trying to be tax dodging, it will consume a great deal of governmental resources to cope with this issue.
It is hard to verify the actual income of these restaurants or stores if they only accept cash payment. As a result, they are likely not to pay the tax of ‘Cash Only’ part. That would be a huge number of tax revenue that the government will lose if most restaurants or stores do the same thing as Mr. Wang said.
In fact, ATO has some measures to identify and take action against tax erosion, but are these measures effective to the practice of ‘Cash Only’?
On ATO official website, it shows that the government has been making efforts on cracking down on tax erosion, especially in cash economy. One of the most important method is data matching. “We collect significant amounts of information from a number of external sources, including banks, other government agencies and industry suppliers. We also obtain information about purchases of major items, such as cars and real property” ATO official website shows.
Data-matching system can be an effective way to identify some businesses to be tax erosion. However, if majority of businesses involved in tax erosion using the practice of ‘Cash Only’, it will be a big issue. It is hard to match the data of every single restaurant, which will be a big challenge for ATO.
In order to protect the privacy, the real name of the restaurant and owner are not used in the article.