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Small business pays the price of leaving food out of GST

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At the hearing today of the Employment. Workplace Relations, Small Business and Education Reference Committee, Mr. Fergus Ryan, Chairman of the Business Coalition for Tax Reform emphasised the importance of comprehensive tax reform to Improve national competitiveness and fairness.


"The Business community is resolved to support the changes In the tax system necessary to Improve troth the competitiveness and the fairness of our society. These objectives are interdependent" Mr. Ryan said.

In particular, Mr. Ryan cautioned that if food is left out of the GST, the cost will fall disproportionately on small business and, as recent evidence presented to the Reference Committee made clear, will add to unemployment.

Mr. Ryan said that a recent report for the National Association of Retail Grocers of Australia estimated that "compliance costs for small business would Increase by 50% if we had a multiĀ­ rated system."

"Small business would also lose the cash flow advantages of the GST. Indeed, some - those who sell food - would suffer from a negative cash-flow".

He said there could also be employment Implications. "In Canada where a G S T was introduced in 1991, grocery food was exempted. This resulted In an immediate sales decline of more than 10% in the food service industry. 46,000 jobs were lost and 5 years later, the Canadian food service industry had still not recovered all that It lost in employment."

Restaurant and Catering Australia estimate that a similar situation here would result in an immediate loss of 20,000 jobs and In the longer term a further 7,000 jobs.

"We cannot afford this situation in Australia.'

Mr. Ryan emphasised the Business Coalition's view that compensation through the income tax and income support systems was the best way to address equity Issues

Mr. Ryan said "we have said all along that we will respond to facts and reputable research as they come to light. If the compensation arrangements put forward In the Government's approach were shown not to be adequate, the BCTR would support appropriate adjustments."

However, Mr. Ryan added "leaving food out Is not the right answer*.

In discussion of the role of Income tax cuts in the compensation arrangements. Mr. Ryan also pointed to the boost for sales that is expected to follow from the substantial income tax cuts. "Every small businessperson will welcome the fact that the Governments package will put more dollars in people's pockets. W e expect a significant stimulus to consumer spending."

3 March 1999 Media Contact: Vicki Flannery: 03 9610 4204; 0418 332272