Publication date: 03 Jun 99 |
Source: THE TAX INSTITUTE
The Government's refusal to increase compensation beyond the $500 million originally set aside in Not a New Tax, A New Tax System, is short-sighted and will leave small business severely out of pocket, according to Michael Dirkis, Tax Director Taxation Institute of Australia.
"The compensation earmarked for small business is peanuts," said Mr Dirkis.
"Considering there are currently an estimated 1.5 million businesses which will act as collection points for the GST, the $500 million compensation package translates conservatively to $330 per small business."
"Given compliance costs pre deal with the Democrats was estimated in excess of $5000 per small business, the compensation is really small beer," he said.
"It is imperative that the Government makes every effort to facilitate the smooth and efficient introduction of GST for Australian business. Lack of appropriate levels of compensation will put many small businesses at a disadvantage as they attempt to prepare themselves for July 1, 2000."
The Taxation Institute of Australia is also concerned that lack of adequate post-deal assistance may lead to higher prices for all, including the prices for basic foods.
"Despite contentions by the Treasurer that the average person in the street is not going to be aware of compliance costs as the compliance argument is only relevant to people running food shops, this argument ignores the logic that these increased costs of running a business must be handed on to the average person - the average customer, " Mr Dirkis said.
"Even small businesses which deal with mainly GST-free food, drugs and select household items will incur additional costs of compliance with the legislation. This cost must be recovered or businesses will reduce profitability and run the risk of going under," he said.
"The Government needs to rethink the consequences of implementation of the new GST deal for small business. Without sufficient dollars available for small business to comprehensively prepare for the introduction of a GST, they may simply not be in a position to start collecting the tax from July 1, 2000."