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Thursday, 6 April 2000
Page: 15415


Mr CADMAN (11:46 AM) —There must be a lot of right stuff in this bill, the A New Tax System (Trade Practices Amendment) Bill 2000, that we are dealing with in the House today—for the opposition hasn't much to say against it. Today in this parliament we are passing measures that make sure people do not exploit members of the public when the goods and services tax is introduced. It is a sensible approach—the community needs that protection. I know that in their hearts the opposition agree with this measure. It is a protection contained in the Trade Practices Act 1974 and these amendments strengthen sections of that act purely for the purposes of the goods and services tax. Two years after the introduction of the tax these measures go out of existence. There is a sunset clause which states that following the introduction of the tax in two years time these strong measures, which are there to make sure that there is not exploitation of the public on prices by anybody in the system, will cease.

I will deal with the legislation first and then comment on some of the arguments that have been employed today by members of the opposition. Some of their arguments really need attention. They are misleading, and I say that not about one of those arguments but about all of them. They are there to confuse, frighten and upset the public. We will see on 1 July how many false, incorrect and misleading statements there have been. This legislation is being introduced to prohibit a corporation in trade or commerce from engaging in certain types of conduct. It will stop it falsely representing, either expressly or impliedly, the effects or likely effects of all or any of the new tax system changes or misleading or deceiving or being likely to mislead or deceive a person about the effect or likely effect of some or all of the new tax system changes. The prohibition applies only where a corporation engages in such conduct in connection with the supply or possible supply of goods and services or the promotion of the supply or use of goods and services.

We saw Woolworths in Wagga Wagga use a technique which could only have been a sort of a pump-priming sale process. They put labels on their garments which said, `These garments are going to cost 10 per cent more after the goods and services tax is introduced.' By that process they were trying to force people to buy ahead of their natural requirements and ahead of their natural time. It was a sales promotion, a gimmick, to get people to buy garments. We understand the way in which commerce works, but the facts of the matter do not stand up. They did not go through their stores and put labels on those things which are actually going to fall in price after the introduction of the goods and services tax, and that is what the consumer needed to know.



Mr CADMAN —The consumer needed to know and be able to make a fair judgment on what goods would rise in price and what goods would fall in price. Woolworths are not prepared to do that. They are prepared to selectively label products that they consider will rise. The Australian Consumer and Competition Commission, the ACCC, went in after Woolworths and they were forced to change their approach. Hence this legislation. The implication that something will rise, that there will be a shortage or that you may miss out on some product or some thing that you may be contemplating purchasing is the way in which markets are driven by advertising programs, by labelling and by statement.

This legislation seeks to prevent that. It applies of course not only to the introduction of the goods and services tax but also to the excise on tobacco products, the reduction of wholesale sales tax rates from 32 per cent to 22 per cent for certain goods, the abolition of the wholesale sales tax and the introduction of the luxury car tax. The penalties which apply are substantial. The thing is to frighten those people out of even contemplating trying to dud the public. The public should not be dudded. If the member at the table, the member for Bowman, is in favour of the public being uninformed—and I do not think he is, but he sought to interject earlier—that is a problem. The public should be informed—they need information. Then they can make their own decision; they can be aware and cautious in their purchases if they have the full information. That is what the government's legislation is seeking to do.

The penalty is $10 million for a corporation or half a million dollars for a person if they transgress. So there is a strong incentive for people to comply with this act. There is a let-out clause where a person makes a reasonable mistake or places reasonable reliance on information supplied by another person; where the contravention was due to the act or default of another person, to an accident or to some other cause beyond the respondent's control; and where the respondent took reasonable precautions and exercised due diligence to avoid the contravention. There is a let-out clause if a person can, before the commission, demonstrate that the contravention was due to causes beyond their control.

The ACCC has already used its powers in a number of instances with the introduction of the goods and services tax, and properly so. People have asked: how are you going to keep prices under control? There is the theory that the marketplace will keep prices under control, and there is also the need to back that up with some strong legislation and empowerment of the Australian Competition and Consumer Commission. The ACCC has used the existing laws against a real estate company that advertised that it was widely believed that the prices of new homes and land were set to increase by up to 15 per cent as a result of the imposition of the GST. Why shouldn't it move in on that? That is just a come-on advertising process to encourage people to buy houses and land ahead of time. The implication of those words—that the prices of houses and land would rise by 15 per cent—is absolute nonsense and rubbish. It is a false statement. The consumer was protected by the actions of the ACCC.

In another instance, a construction company claimed that the value of its apartments would instantly increase by 10 per cent in July 2000—another case of a company seeking to falsely encourage purchases. There are three other instances of used car sellers who ran advertisements calling on consumers to `beat the tax man today' by purchasing vehicles before the introduction of the GST. This is absolute nonsense. Car prices have come down and will continue to come down. The government has managed the transition period of the goods and services application to the motor industry with a great deal of skill, in my opinion. But false statements like that need to be stopped. One bookstore printed on its customer receipts the words `Books will cost 10 per cent more with a GST'. Ahead of the time, and in the way in which they did it, that was just an advertising gimmick.

The ACCC has also objected to the use of dual ticketing as a marketing tool, and I have already mentioned that. If it is going to mislead customers, it needs to be stopped. I will just take a moment here to indicate that I do understand the need for retailers to order a long time ahead. I understand that, where retailers are ordering offshore, ticketing is done offshore. Retailers, large chains, need to make provision for the change in prices that will occur following the introduction of the goods and services tax. There is a reasonable argument for people to be able to undertake dual ticketing, and the government has heard that argument and has responded. But it should not be a dual ticketing process that extends from Christmas 1999 to Christmas in the year 2000. That is a process of encouraging people to buy when they have no real inclination. It is false advertising.

The bill prohibits corporations in trade or commerce from engaging in conduct that is misleading and deceptive or likely to mislead or deceive. There is already provision for prohibition against misleading in relation to the price of goods and services. However, the government, with this legislation, has gone further. The key words in the bill are where the process `falsely represents' or is likely to have the effect of misleading or deceiving. So this is a somewhat stronger measure. The new prohibition on misrepresenting the effect of the new tax system changes will capture conduct that is already prohibited by state and federal legislation. It drags people in.

I draw the House's attention to a couple of interesting items in regard to the government's role in policing the introduction of the goods and services tax changes. The insurance company Zurich Australia has been forced to repay some of its policyholders following complaints on the consumer hotline to the prices watchdog, the Australian Competition and Consumer Commission. It was reported in the Australian Financial Review on 1 March:

In the biggest case yet of business being caught out on the GST, insurance giant Zurich has been forced to refund nearly $50,000 to policy holders.

The Australian Competition and Consumer Commission said it had identified `systemic failure' in Zurich's calculation of the GST applying to 348 workers' compensation policies.

That is proper application and action by the ACCC, and we are strengthening its capacity to do that. The ACCC has warned it will clamp down on businesses that charge unfair prices. Again, the same article in the Australian Financial Review states:

And last night, the competition watchdog warned businesses to get their houses in order or face tough scrutiny over GST implementation ...

Another six insurance firms, apart from Zurich, are being investigated ...

There is a hotline number, and the hotline number is 1300 302 502. That is a hotline for consumers to use. Altogether, the ACCC has handled 2,500 complaints via its GST hotline. It has investigated 175 of those complaints, and activity has been focused on insurance in the motor vehicle and building industries. They have been the main culprits, the ones most likely to make claims that are misleading.

The ACCC started proceedings against Meriton Apartments for misleading advertising relating to the GST—I have already mentioned that. The monitoring will continue until July 2000 with four main surveys comprising 9,000 outlets across Australia and covering three million prices. That is the extent of the government's determination to make sure that there is proper observance of the changes by the commercial world.

Woolworths, following the fiasco of double labelling, put out a statement about its perspective on the full impact of the GST. This is a responsible action by Woolworths, but it brings to light the fact that the sales campaign with the garments was a try-on and it then issued a statement saying what the true facts were. The Woolworths Group managing director, Roger Corbett, said in a statement on Sunday, 27 February 2000:

... prices in Woolworths stores will not move dramatically when the Goods and Services Tax is introduced on 1 July 2000.

“We want our customers to be clear and confident about the relationship between the GST and prices in our stores ...

“In overall terms, we estimate that Woolworths' supermarket prices will only go up by 0.8 per cent of current sales value.

That is 80c in a $100 purchase. So for the average family that spends a couple of hundred dollars a week on groceries at Woolies there will be $1.60 extra money in your pocket from the tax cuts. That is the way it is going to work. Mr Corbett went on:

“Around half of everything sold by supermarkets will be GST-free ...

“We estimate that prices of general merchandise in our Big W stores will rise by only about 1.1 per cent.

That is $1.10 on a $100 purchase or $2.20 if you spend $200 per week at Big W. Mr Corbett went on:

“Customers will get clear benefits from the removal of the wholesale sales tax.

“These estimates are based on today's prices and the mix of our current volume of sales—

which is a fair enough statement—

“As we get closer to the introduction of the GST it is important for everyone to understand the bigger picture of what this all means for our customers.

The customers, so the opposition says, need to know how much tax they are paying. It is a very simple thing: the tax will be on all of the things they buy except food. If they calculate one-eleventh of what they pay, they will know precisely what the goods and services tax is. It will be on everything at the same rate, and a simple calculation of taking one-eleventh of the total purchase price will give them the tax measure that the government is collecting. It does not have to be labelled separately. It does not have to be in the most confusing way that many overseas countries do it where they put a label on and then, when you get to the checkout, you find that you have to pay another 10 or 15 per cent or whatever their value added tax is. That is not the system we are adopting in Australia. Nobody is going to be caught that way. The consumer will know the price on the shelf and at the checkout. That is the decision taken by this government.

I was interested to hear some of the comments by the shadow Treasurer because he is not known for getting things right or for getting his head around facts very well. So I did some chasing back to have a look at some of the statements he has made over time about the goods and services tax. I came across this statement when he was Minister for Primary Industries and Energy in 1992 when he was quick into the fray to attack the goods and services tax. I quote from Hansard of 25 November 1992 when Mr Crean in full flight was talking about the goods and services tax and his understanding of it:

But do you know what the GST is, Mr Speaker? It is a tax on value adding because it taxes every stage in the value adding process. Have you told that to the farm sector?

What a mistaken concept! No understanding whatsoever of the goods and services tax, and he is the man that pretends to be the Treasurer in waiting of the country. He went on to say, after opposition members corrected him on that:

It is not wrong. It is a tax of value adding and you are fools if you do not understand it.

We have heard that expression `you are fools' a number of times from Mr Crean over the years. It seems to me that he uses it most frequently when he is uncertain of his own ground. But, in this instance, he was completely wrong. He had no concept, no understanding whatsoever, of the application of the goods and services tax. In another speech a year earlier when attacking the then opposition, he said that the 15 per cent goods and services tax that was being proposed by the opposition at that time will hit consumers `with a 15 per cent hike on everything they spend'. There he goes again saying there will be a 15 per cent hike and not being prepared to allow that, by the removal of taxes and charges, prices will come down before a goods and services tax is added. The campaign of frightening and scaring people will be put to rest on 1 July. It cannot come too soon for my liking, because then we can start comparing the statements being made by the Australian Labor Party today with reality.