While researching my column on John Howard’s ten years as PM, I came upon the quote from Howard which I used in the column – that ‘multi-stage VATs’ involve “enormous” administration and compliance burdens. I also came upon a quote from the Regulatory Impact Statement for ANTS RISs 1 – which was the package that brought in the GST.
In an earlier post, I drew attention to the fact that at least for this government (and perhaps, though I expect to a lesser extent for the previous government) the RIS process is not simply ignored, but comprehensively traduced where it stands in the way of political objectives. Thus instead of even a token effort to delineate the costs and benefits of labour market de-regulation, the RIS for that exercise just outlined a few political slogans and left it at that. Everyone was a winner.
I also checked out the RIS for ANTs on compliance costs. Here’s a passage.
The cost of complying with the GST will be marginal for most businesses because the compliance requirements are for the most part the same as existing income tax and accounting requirements. Compliance costs will tend to be higher where businesses sell a mix of GST-free and fully taxed goods, or a mix of input taxed and fully taxed services.
In fact one’s compliance costs from differential rates are pretty much the same on the costs side as they are on the revenue side, and most businesses will receive invoices that have full GST charged, are GST exempt and zero rated. They can also receive invoices with a mix of treaments and which fit one of these categories partially. So whether their outputs are differentially taxed by the GST is only one half of the problem.
Just last week someone in the business I run and I spent about 15 minutes trying to figure out why some postage costs didn’t come with full GST credits. It turned out that international post is GST zero rated. Was it fully zero rated (which is technically wrong since some of the value added is in Australia), or partially zero rated? I’ll leave it to you to find out one day.
I mention this because people keep blithely saying that it’s all fixed now. The set up costs might have been the best part of $8,000 per small business 2 – an incredible figure in its own right – but now it’s all computerised, and the GST is just entered by a computer. That’s true in the case of most invoices, but the fact that it’s not true for some means one can’t just leave it to the computer. You have to check each invoice or at least ask yourself if it’s in an unusual category.
But the RIS couldn’t acknowledge any of that in 1998 with a political firestorm going on about the GST. It was an “enormous paper work burden on both taxpayers and collecting authorities” in 1981 and “marginal” in 1998. So there you go.
When I downloaded the RIS that I’ve linked to above, I saved it without going to the relevant site where it was posted. I discovered to my dismay when posting the link from which I had got it that it was from the Office of Regulation Review’s website.
In preparing a Regulation Impact Statement (RIS), officials often find it helpful to examine examples of RISs which the Office of Regulation Review (ORR) has assessed as adequate. The following examples have been published on this website for that purpose.
Dear oh dear.
- pdf warning