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Exempting food from GST crippling for small grocers



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National Association of Retail Grocers of Australia

N A R G A AUSTRALIA PTY. LIMITED Tuesday 1 December 1998

MEDIA RELEASE A G — > "Ac ExemptingrEgod from GST Crippling for Small Grocers A G ST which exempts or zero rates food would be disastrous for small business in terms of administration and cost of compliance according to a study by Arthur Andersen released today by the National Association of Retail Grocers of Australia (NARGA), which directly represents 10,000 small and independent retailers.

National Spokesperson for NARGA Alan McKenzie explained that although the Association supports tax reform, the Arthur Andersen report confirms our worst nightmare that the complexities of a multi-rate GST would make the cost of compliance so high as to be crippling to small businesses.

“To date much of the GST debate has focused on the effect on low income earners however it is essential that in their deliberation the Senate also considers the burden on business, particularly small business, who will shoulder the burden of collecting and administrating the tax," Mr McKenzie said.

“Overseas studies referred to in the report show that the GST system as proposed by the Government will already place a greater burden on small businesses than on their larger counterparts in terms of cost of compliance. It will therefore be vital that adequate compensation is included as part of the package to cover both the initial expenses of putting compliance systems in place and the ongoing costs of tax collection."

“If however the package is modified during its passage through the Senate to become a multi-rate system, through the exemption or zero rating of food, the cost of compliance would escalate.to an unsustainable level jeopardizing the viability of many NARGA members.”

“A multi-rate system would also mean that retailers assume the risk of classification disputes such as occur overseas. For example, in Canada a single doughnut is excluded from the definition of “basic groceries" and is therefore taxable, in contrast six or more doughnuts bought from the same premises are covered under the definition and are tax free."

“Trying to distinguish between basic grocery items and take-away foods in a small supermarket would be a nightmare and leave the retailer open to constant litigation with the Australian Tax Office and the extra burden of any additional tax that may be claimed where such a classification dispute arises," Mr McKenzie said.

“As the small business sector provides jobs and family income for hundreds of thousands of Australians as well as local cash flow for rural and regional communities, it is essential that any tax reform proposal takes into consideration the complexity of administration and provides suitable compensation for small retailers to cover the cost of compliance."

If as a result of the findings of the Senate Review, the Government decides to make the tax package more progressive, this must be addressed through compensation mechanisms rather than by exemption or zero rating of food, otherwise the regressive burden of the tax will merely be shifted from consumers to the small business sector.

For further information: Alan McKenzie PH: (02) 9208 1560 or MB: 0417 212 348

OR NARGA Public Relations

PH: (03) 6223 3333 or MB: 0414 60 40 20 State Coordinators also available for interviews