GST Red Tape Hurting Economy

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Australia’s GST red tape is among the most complicated in the world, stifling small business and hampering the economy, a new report says.

Software provider MYOB says administering the GST is an extreme burden on small businesses, costing almost $14 billion across the economy and roughly $7,000 per business.

The current system requires business owners to sift through every single transaction and justify any items that did not attract the GST, using one of eight categories to explain why.

With 44 per cent of goods and services not attracting the tax, that’s a lot of extra paperwork, MYOB chief executive Tim Reed says.

The complicated system is stressful for business owners who usually don’t understand why the information is collected, are paranoid about getting fined for using the wrong category, and are not aware the process has no impact on the amount of tax they pay, he said.

The government should either remove exemptions to the GST so all transactions attract the tax, or alternatively, remove the requirement for each transaction to be allocated to one of the various `No GST’ categories, Mr Reed said.

The latter option has no impact on the amount of tax collected, and is how the system works in New Zealand, where small business owners are spending half the amount of time and money on GST compliance, he said.

Sydney hairdresser Penny Martin said GST red tape became so stressful, costly and time consuming that she scaled back her business, closing her salon, letting go of staff and regularly turning down clients so she could earn less than $75,000 and avoid the GST responsibilities.

“I have purposely scaled down my business for that very reason, because it’s all just too much,” Ms Martin told AAP.

“I do not want to cop the GST, I’d rather earn less, go away and do a couple of days teaching a week and say no to customers and not bother, it’s just not worth it.”

An MYOB survey of 1,000 small businesses found 60 per cent would change their vote at the next federal election if the government significantly simplified the GST reporting process.

Governments have been aware of how onerous the system is but are reluctant to touch the “taboo” topic of GST, Mr Reed says.

“Any change to the GST is a very politically sensitive area and therefore, many governments have shied away from even raising the possibility of touching the GST,” he said.

Small Business Minister Bruce Billson said the government was already taking steps to clear the red tape, committing to reduce compliance costs by a billion dollars per year.

The matter was also being considered through the tax review white paper, he said.

“We recognise that excessive red tape and compliance costs gum up the economy and strangulate entrepreneurship and that’s why our conviction is to reduce that where it’s possible,” he told AAP.

This news story is reprinted from www.businessspectator.com.au

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