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Thursday, 13 April 2000
Page: 15931

Mr BEVIS (1:01 PM) —I rise to support the amendment moved to the Taxation Laws Amendment Bill (No. 11) 1999 by my colleague the member for Wills. In doing so, I want to address the developments that occurred earlier today when the Treasurer announced the government's backdown on a key element of the Ralph review. This government heralded the Ralph review as a major change to corporate taxation and a change that would see a fairer system in place on a revenue neutral basis. After some considerable debate, the shadow Treasurer, Simon Crean, extended a bipartisan hand of support to a Ralph review package on a number of undertakings. One of those undertakings was that the package would be revenue neutral. Another was that the known tax loopholes, the known tax evasion methods engaged in by too many people, would be closed. This morning the government reneged on that; this morning Treasurer Costello welshed on the undertakings he gave in this parliament, the undertakings he gave privately and the undertakings he gave publicly outside this parliament.

Because the government wanted to pander to a section of its own backbench and did not have the intestinal fortitude to deal with these tough issues squarely, as it likes to tell the public it does, the government last night at a party room meeting decided to do in the Treasurer and his commitments, to hang him out to dry—I am sure the Minister for Employment, Workplace Relations and Small Bus-iness is pleased about that outcome—and it decided to blow a $1 billion hole in its own es-timates over the course of the next three years. By welshing on the undertakings that it would close the loopholes currently used by contractors—and in particular that group now identified as dependent contractors—and by allowing that group of people to access tax evasion techniques, the gov-ernment this morning announced changes that mean $1 billion worth of revenue will be denied to the Commonwealth. We need to un--derstand what that means. It means that those decent, ordinary Australian workers who do not have access to those tax avoidance measures and who work week in, week out and pay their taxes earnestly and hon-estly every fortnight when they get their pay will have that $1 billion debt fall to them. This is not $1 billion that no-one pays; this is $1 billion that ordinary decent Aus-tralians have had slugged on to their shoulders because this government cannot keep its word.

The Labor Party and the parliament are going to be very keenly pursuing that commitment that the government gave and which this morning it has reneged on. If the Treasurer and the government party room think they can get away from their undertakings so easily, they will quickly find out that not just the parliament but the people of Australia will not tolerate it. Those ordinary wage and salary earners who pay their tax before the money even gets into their hands know that they are already having to shoulder too heavy a burden. They know that, when the GST comes in, they will have to shoulder an even heavier burden because, by and large, they are the people who do not earn the incomes over the $100,000 mark and who score well under the government's tax regime. These are people who spend just about all of their wages. They are ordinary Australian family people whose wages cover the rent, the food, the upkeep of the house and looking after the children's welfare and, if they are lucky, they have a bit of money set aside for a holiday once a year. They spend virtually all the money they get. Under this government's tax system, they pay tax up-front before they get the money, and when they go to the shop to spend it they will pay tax again on everything. If they get their hair cut, they will pay tax on that; when they go on their annual holiday, they will now pay tax for the motel accommodation, which they did not pay before. This government is going to slug them again on that. These are the people who deserve relief. Instead of getting relief, today they got an extra $1 billion bill foisted on them by this government's hypocrisy and by this government's lack of intestinal fortitude.

The Ralph review and the commitments that were given by the government to it were integral to the Labor Party's support of that package. You just blew a $1 billion hole in the revenue neutral calculation of that measure. Not only have you skewed it by $1 billion but you have foisted that $1 billion on decent, ordinary Australian working men and women. I think the Liberal Party, the Treasurer and the party room had better have another look at that issue. If they think the parliament is going to lie down and wear that, they are in for a shock.

That was the unexpected news of this morning. I must say it was unexpected because I foolishly took the Treasurer at his word. I have been telling people since then that the government had given this commitment and that we had no reason to doubt that they would honour it. I now see that that was a foolhardy position for me to adopt—that I should have given any credence to an undertaking given by the Treasurer. For me to believe that an undertaking given by the Treasurer in the parliament, in public and in private might actually mean something obviously reflects my view of what a person's integrity and word is about. Clearly, the Liberal Party and the Treasurer have a different view of what someone's integrity and personal standing account for. With this government, it counts for little.

Mr Byrne —Was it non-core?

Mr BEVIS —Indeed, as my colleague has interjected, it was a non-core promise. In fact it was three non-core promises on the one issue. It may well be that in his quest to become the next leader of the Liberal Party the Treasurer has decided that he should emulate the Prime Minister's performance on promises and undertakings and that he can give these sorts of promises and just squirm out from under them. He cannot squirm out from $1 billion. Ordinary Australians are not going to be landed with that bill because this government does not have the intestinal fortitude to close the tax loopholes for some of its mates.

There has been a lot said about the problems of this government's new tax scheme and the hardship that the GST is going to impose. A lot of people have focused on the goods aspect of it. Increasingly, people are starting to comprehend the impact it will have on services. There is also the impact it will have on those people who are just about to become unpaid tax collectors for this government. Those people, particularly in small business, do not have large accountancy divisions, do not have large IT sections. They do their own accountancy work and at the end of the quarter or at the end of the year they see their local suburban accountant to try to get the bookwork tidied up for the various returns they have to submit. Those people, as we know, are significant employers in this country. By and large they work extraordinarily long hours and they seek to make an honest dollar.

Not only are they now discovering the burden of compliance; they are now falling prey to other less reputable firms that have taken the opportunity of their vulnerability to score excessive profits. I want to read a letter I received from a business just outside my electorate; it is on the border and it is frequented by people in my electorate. The letter is from a Night Owl shop, a convenience store. There are some 1,000 of these Night Owl franchises around Australia. The owner of this franchise wrote to me and said:

I run a small convenience food store in a fairly competitive market.

My technology supplier is Retail Technology & Services Ltd. (RTS), a listed public company.

Through its subsidiary, RETECH GLOBAL, the old B&H, it is attempting to blackmail me into spending $7,990 to become GST ready on my scanners and PC.

I still use a perfectly adequate DOS system and only need to have that system modified to cope with the GST.

RTS/RETECH GLOBAL could modify (amend) the system at a finished cost of $200 per store. They have 500 DOS users out of a total customer base of 1100.

So that is nearly half of the client base using a DOS system. The letter went on:

A charge to each DOS retailer of $400 would give them a net profit of at least $200 per store; a net of 100% on cost—a handsome return. The gross revenue is $200,000; the net profit is $100,000.

They are not satisfied with that. Instead they are forcing us to make a choice.




The attached letter sets out the detail.

The letter from the owner of the store went on:

There is already an overload of work at store level to cope with GST, without having to cope with this nonsense.

... We have no hope of absorbing $7,990.

We are prohibited from increasing prices beyond the impact of the GST on products.

He finishes by saying:

There are 499 other stores in Eastern Australia (plus some in WA) in the same boat. Most are incensed with this blackmail tactic. Retailers are not able to recover cost increases arising from being fleeced, if the ACCC guidelines are to be believed.

I have looked into this matter. The concerns of that store owner are absolutely right—they are being fleeced. The company has written to all of these firms involved in the operation of Night Owl franchises and it is true. They have said to the people who operate a DOS system:

... you will need to convert to Grocery Manager for Windows prior to implementing the modifications for GST.

The conversion package will include ...

Then it sets it out: the new computers, the new operating systems, the wholesale sales tax stocktake valuation, the recalculation of cost prices—and so it goes on to the tune of $7,990. If you happen to be one of the 50 per cent or so of Night Owl stores who already operate on their new system, they will put the GST module on for $1,500, which I would have thought was a pretty decent sort of mark-up in any event. But they are not willing to offer a GST module for the DOS operators at all.

These 500 small businesses—members of parliament will know these stores; when we finish our late night meetings and are on our way home, I do not know about the rest of you, but I have seldom not called into a Night Owl store to pick something up on the way home—are open all hours of the day and night to make a quid and to provide a service. They are now confronted by a supplier who has looked at what this government has done and said, `Well, come in, spinner. Here's my opportunity to make a killing. These companies have to be GST compliant or the government will take them to court; they'll be gone. So they have to be GST compliant. We maintain their computers, so here's our opportunity. We will not just mark up the price of the GST module; we'll sting them for a whole new computer and operating system—$8,000, thank you very much.' What does this government say about that? This government says, `We are going to give that operator a $200 cheque.' This store is going to get a $200 cheque from this government to pay an $8,000 bill. Two hundred dollars is what John Howard and Peter Costello think these businesses should get to compensate them for an $8,000 bill.

This particular store owner wrote to the government as well. He wrote to the Deputy Prime Minister and, I might say, to the Prime Minister. To the best of my knowledge the Prime Minister has not answered, but the Deputy Prime Minister did. The office of the Deputy Prime Minister and Minister for Transport and Regional Services wrote back on 4 April. The letter was signed by the senior adviser, David Kelly. This is what he said in part:

It seems unlikely that your provider's reluctance to offer a cheap upgrade offends any consumer legislation ...

So, as far as the Deputy Prime Minister is concerned, `Sorry, it doesn't look as if there's anything wrong here.' The letter from the Deputy Prime Minister went on:

... but it is probably worthwhile contacting the ACCC about it.

Not that the minister's office were going to do it. Not that they could pick up the phone or send a letter off to the ACCC. They said to this store owner, `When you're doing the rest of your paperwork tonight, you might like to do up a letter to the ACCC. We don't think it breaches any law, but why don't you write to them anyway?' That is a lot of help and assistance! It will go with the $200. It will make a big difference to the plight of these 500 store owners. But the letter got worse. The letter then went on to say:

The glib answer to your problem is to find another supplier ...

This is the considered opinion of the holder of the second highest office in this land, the Deputy Prime Minister—`The glib answer to your problem is to find another supplier.' It then went on, though, to say:

... but I take it from your letter that you and other retailers are committed to these people through the existing software.

Well, you are damn right. In other words, it was a glib answer. It was also useless. So the Deputy Prime Minister's advice is, `Contact the ACCC, contact the ATO as well, but really I don't think there's anything you can do about it.' Just in case when the store owner read through the letter he did not get the message that the Deputy Prime Minister's office was not about to do anything and did not think it could, not even pick up the phone to the ACCC, the letter concluded by saying:

I can assure you that I can understand your frustration, but this is not an area where Mr Anderson could apply any direct pressure.

Well, thanks for sending me the letter. That is wonderful! That is the response this proprietor has got from the government. The government has foisted upon not just the consumers of Australia but the business people and in particular the small business people of Australia a system which is burdensome, harsh and unfair. When confronted with these problems, its answer is to provide glib and useless answers such as the one I have just read from and to provide very little acknowledgment of, much less understanding and empathy for, the plight of these people.

We have written to the ACCC and we will be pursuing this matter on behalf of this business and other businesses in this situation. The government needs to wake up and improve its act. It has got a bad tax. It is confusing and it is confused about its own tax. It has a bad tax which it is implementing poorly. This is a convergence of the worst set of circumstances and now we know it is a bad tax being implemented poorly, causing great consternation amongst businesses. It is also providing opportunities for unscrupulous operators to do the sort of thing that I have just set out in the parliament today.

There is no reason why this shop owner and the hundreds of others in exactly the same situation should be effectively blackmailed into paying out $8,000. If the government thinks the conversion cost for this is no more than $200, and that is all it is giving these people, my suggestion to the government is that it provide a written guarantee to these small business people of Australia that it will meet any cost they incur above $200—that is, the government will pick up the bill above $200. If the government wants to be fair dinkum about it and honour its promise that no-one will be worse off, it seems to me that that is a fair compromise. So I would say to the Treasurer: while you are back-pedalling on all the other things you have back-pedalled on, you should give some thought to that and do something decent for the small business people who are feeling it coming and going. The small business people are getting it both ways at the moment from this.

Finally, let me return to where I started in relation to the government's undertakings to close tax loopholes. This is a very serious issue. It is not to be taken lightly that the government today flippantly announced a $1.1 billion hole in its revenue base over the next three years. That is just over the next three years; it gets worse as you go through the out years. That $1.1 billion totally throws into disarray the tax reform package that the government was proposing to pursue from the Ralph inquiry, and I strongly urge all members of the government to think twice about that if they want to see the Ralph reforms through this parliament.