The COVID-19 pandemic derailed the Commonwealth's clampdown on the shadow economy designed to recoup billions in unpaid tax.
An audit of the federal government's blitz on the "shadow" or "black" economy, which refers to economic activity outside the tax system, painted a mixed picture of the government's response.
The auditors looked into the multimillion-dollar response to the Black Economy Task Force report in 2018 that found shady economic activity was on the rise and could be as large as three per cent of gross economic product.
The report recommended clamping down on cash wages, illegal tobacco sales and a range of other measures to claw back lost tax revenue.
An Australian National Audit Office investigation into the government's response found Treasury largely dropped the ball on its role of co-ordinating the action plan that spanned several government agencies.
The auditors found the department missed the mark on co-ordinating the response across government as well as monitoring progress against the recommendations.
Treasury was handed $12.3 million to manage the rollout across multiple agencies, but its work was disrupted by the COVID-19 pandemic, which prompted the agency to "deprioritise" the project.
The other two main agencies involved, the Australian Taxation Office and Home Affairs, were found to be "largely effective" in acting on their recommendations. This included setting up an illicit tobacco task force within Home Affairs.
Treasury has accepted the audit's findings and recommendations but called for "greater acknowledgment" of the work that had already been done and the impact of the COVID-19 pandemic on resourcing and priorities within the agency.
The ATO and Home Affairs have also taken the feedback on board and will continue their work on tackling the shadow economy, which cost roughly $12.4 billion in lost tax in 2019-2020.
About $921 million has been funnelled into the government's response to the shadow economy task force since 2017.
The audit found 12 of the 27 agreed recommendations from the task force had been implemented.
