Prime Minister John Howard should resist the knee-jerk reaction of his back-benchers to change in any significant way the quarterly Business Activity Statement. Anything new is bound to attract opposition. Anything new is bound to cause a certain amount of difficulty until the new becomes the routine. The BAS system has simply not had enough time to be bedded down to become routine. Businesses have only had to present two BASs, so business owners and their staff have hardly had time to familiarised themselves with the procedure. It would be like turning on a spreadsheet program on a computer and after giving it a couple of starts pushing it aside and returning to a calculator or manual adding-up.
Australia has one of the easiest financial reporting standards fior business in the developed world. Most require monthly reporting. The BAS is not especially onerous. Indeed, a lot of welfare recipients have to lodge forms not much simpler and more regularly. For too long much of Australian small business has slopped along with a shoebox attitude to accounting. The shoboax of receipts comes out towards the end of the financial year for the annual tax return. It is not good enough. The BAS has imposed some welcome discipline on small business. Many business have very little idea how they are travelling through the year. The BAS will help them track not only liability and credits for GST and income tax, but also profit and loss, outstanding creditors and the like. The requirement for quarterly reporting has made many businesses update their accounting procedures and the computing used to do it. Having come this far, the Government should hold out. The vast majority of businesses are coping well with the BAS. More than 90 per cent got the first one in on time and that is likely to be exceeded the second time around.
There have been transitional complexities. The transfer from wholesale sales tax and provisional tax have added complexity to the initial task. But that is now over.
Business has had it too easy for too long on reporting standards. One of the main attractions of the GST was its capacity to reduce the size of the black market and reduce tax avoidance. Perhaps this is one of the reasons that a minority of businesses are screaming.
The risk of moving to annual returns is very high. Businesses would have to guess their GST liability. While the tax remained unpaid over the full financial year, businesses might get a rude shock at the end of the year. The beauty of quarterly reporting is that businesses know how they are travelling and can adjust accordingly. It would have been dangerous to have waited a year for the first return. Further, it would not have been possible to introduce a quarterly estimation system follwoed by an annual reconcilitation because there was no past GST record to base the estiamtion on. Treasurer Peter Costello has pointed this out.
With any luck he might be able to restrict the changes to the BAS to some comestic simplification until business sees gets used to the routine of quarterly reporting and sees its benefit.
Busineses having difficulty with the BAS are probably not running sensible accounting procedures which would help their business in the long term. They should stop looking for scapegoats and look at whether their own procedures are suitable for modern business conditions.