One might well wonder who was left holding the baby over the past week. Was it Sports and Tourism Minister Jackie Kelly who became the first Federal Minister to have a baby while in office? Or was Joe Hockey, it the Minister acting in her portfolio and a couple of other portfolios at the same time while various Ministers took leave during the “”quiet” summer period. Mr Hockey is Minister for Financial Services.
On Friday last week he said that business could round up GST charges to the nearest dollar as the Australian Competition and Consumer Commission had declared rounding off legal. But when Qantas rounded up the $1.50 GST levy on frequent-flyer memberships to $2, there was an outcry. The next day Mr Hockey reversed his decision, saying that the Government would not tolerate any price rises about 10 per cent.
It looked like the Government did not know what is was doing. And in some respects it didn’t. Mr Hockey’s initial stand gave a poor impression to consumers. This was because it arose from looing at things from a business perspective, not a consumer perspective. Business wants rounding because they say it makes for easier accounting. Business says that overall, rounding would not make any difference because each business GST on total takings at exactly 10 per cent. Some prices might go up by more than 10 per cent but other prices would come down an equivalent amount.
A consumer, however, faced with a rounding up of one item, it not interested that another consumer might benefit from an equivalent rounding down. Seen from a consumer perspective, rounding looked a bit suspect.
But Mr Hockey over-reacted. We are not dealing with huge amounts of money here and overall, consumers will get some swings and roundabouts as they pay for some items rounded up and others rounded down. His over-reaction is indicative of how sensitive the Government is over the GST.
The substance of the ACCC’s concern is not a few cents here and there with rounding. Rather the ACCC is right concerned that some businesses might engage in quite large price increases and blame them on the introduction of the GST. That would be misleading conduct.
On the question of rounding, however, business has been a little two-faced. It argues that it wants rounding to ease accounting work. However, retail businesses are notorious for pricing things awkwardly to give the impressing to consumers that things are cheaper than they really are. Price tags like $8.99 and $13,999 abound in shops and caryards. Applying a 10 per cent GST to such prices is a self-inflicted accounting injury. In any event, most goods will require the removal of a component for wholesale sales tax before the GST is applied. It is likely therefore that any failure to apply an exact 10 per cent GST to the price disingenuous will occur not through any accounting difficult but through retailers’ desires to end up with advertised prices like $5.95 and $11,999, not to round up or down to the nearest dollar.
The real trouble for the Government, however, will come when retailers start telling people on their receipts how much of the advertised price comprises GST. At present they do not put the wholesale sales tax component on the receipt because it would give away their mark up. Come the GST, people will be more aware of tax and that might harm the Government.