Economy

TPA: Business backs Fielding… Loosing the dogs of tax… More Telstra bluster… NSW paryoll tax hopes dashed… Simpler tax laws a step closer… Economy roundup…

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Business backs Fielding on predatory pricing

Small business groups have backed Family First Senator Steven Fielding’s plan to introduce legislation on Monday next week to strengthen laws designed to protect SMEs against predatory pricing by big business.

The Howard Government has been working on a bill to amend the Trade Practices Act to improve protection against predatory pricing since the Dawson review in 2003. Fielding says SMEs cannot wait any longer.

“It is a joke that small business has been waiting for protection for over three years,” Fielding says. “We cannot undo the market domination but we can have laws that ensure genuine competition and the lowest possible prices.”

Although Fielding’s bill has yet to be made public, it is reported that it will make it easier to build cases against big businesses for predatory pricing by applying a legal test focusing on the effects of their actions, rather than their intentions.

And Fielding may have some chance of forcing the Government to move on the issue because his vote, along with that of dissenting National Party Senator Barnaby Joyce, controls the balance of power in the Senate.

Small business groups this morning praised Fielding for taking the initiative to improve protection against predatory pricing.

The Victorian Automobile Chamber of Commerce’s executive director, David Purchase, says he would urge all MPs to support Fielding’s bill.

“We absolutely support this moves to strengthen the Trade Practices Act. We think for far too long big business has been lording it over SMEs, especially in our sector where we’ve had difficulty with oil and insurance companies unfairly dominating crash repair and service stations for years. It’s high time the ACCC is given wider and stronger powers,” Purchase says.

The chief executive of the National Association of Retail Grocers of Australia, Ken Henrick, says he hopes that Fielding’s changes will be incorporated into the Government bill.

“There no question there is a need for further reform. We have the most concentrated grocery industry in the world, with Woolworths and Coles holding 80% in the market. This has a huge impact on competition and we need strong laws to deal with that,” Henrick says.

COSBOA’s chief executive, Tony Steven, says Fielding’s bill is innovative. “It appears to be based on Canadian model, which says that if a larger store that’s part of chain wants to discount its prices it has to discount across all its stores. That would act as an effective deterrent against predatory pricing in local markets,” Steven says.

– Mike Preston

Who let the (tax) dogs out?

The ATO may outsource tracing debtors to the private sector after it was revealed yesterday that Australia’s small business sector that 600,000 small businesses with turnover of less than $2 million owed the tax office a total of $6.4 billion.

A report from the National Auditor on the debt caused uproar as the media labeled small business tax cheats and small businesses and accountants replied. Join the debate.

The report showed that 43% of the micro business sector debt was older than a year and 26% greater than two years old. The report recommended the ATO develop a model to recognize the cost of continuing collection action on a debt that has limited chance of being collected.

The report also gave a revealing look at how the tax office will be collecting data going forward.

The report says that as at June 30, 2007, the ATO had 71,500 micro business debt cases that were untraceable and without a useable phone number. The ATO is finding better ways to maintain current contact details and may outsource tracing debtors to the private sector, the report says.

It would also benefit from liaison with other Commonwealth agencies such as Centrelink and the Child Support agency, which has good quality location data on its clients.

The ATO will also be able to improve its targeted campaigns using better tools and management procedures. The ATO will also be looking to “obtain” consistency of collection practices and improve data matching to better tailor debt treatment options

– Amanda Gome 

Telstra continues broadband bluster

Telstra chief executive Sol Trujillo has fired another shot across the bows of the Government on broadband, threatening to withdraw its fibre-to-the-node network proposal if the public review and tender process takes too long.

In a letter to Telstra staff yesterday, Trujillo says: “If the process that is put in place strings out a decision over months rather than weeks, it will not meet the ‘timeliness’ test that our leadership team has to meet in order to make this year’s capital allocations deadlines”.

If that occurs, Trujillo says, Telstra will abandon is fibre-to-the-node proposal and devote the $4.1 billion earmarked for it to other projects.

Trujillo also says that although he welcomes the Government’s new public review and tender process, Telstra will not be amending its proposal, which has previously been knocked back by the Australian Competition & Consumer Commission.

We are not engaging in this process to “develop” or “refine” or “negotiate” a plan,” Trujillo says.

– Mike Preston

NSW payroll tax cut hopes dashed

NSW businesses are likely to be denied the hoped-for payroll tax cuts when the state budget is delivered next week.

Despite strong economic conditions, which are expected to provide a revenue bonanza for this year’s budget, Premier Morris Iemma says there are no plans to cut payroll tax rates, according to an Australian Financial Review report today.

NSW’s 6% payroll tax rate is the highest in the country and compares poorly with the 5.15% rate in Victoria and 4.75% in Queensland. The NSW Government collected $5.5 billion in payroll tax in the 2005-06 financial year.

Iemma looks set to follow other state governments in using fruits of economic growth to increase spending on infrastructure.

And in other state news, workers in Western Australia have been awarded a $24 a week pay rise by the state’s industrial relations commission. The rise, which takes effect in July, will only apply to workers within the state industrial relations system.

– Mike Preston

Simpler tax laws pass through parliament

Small businesses with annual turnover below $2 million will be able to access a wide range of tax concessions under legislation passed through Federal Parliament yesterday.

The laws, announced as part of this year’s federal budget, standardise the definition of small business so that all business with revenue below the $2 million mark can apply for concessions including:

  • CGT 15-year asset exemption.
  • CGT 50% active asset reduction
  • Simpler depreciation rules.
  • Immediate deductions for certain prepaid business expenses.
  • Choice to account for GST on a cash basis.
  • Choice to pay GST by instalments.
  • FBT car parking exemption.
  • PAYG instalments based on notional tax.

The legislation also increases the maximum net asset value test for accessing CGT concessions from $5 million to $6 million and lifts the GST cash accounting threshold from $1 million to $2 million.

– Mike Preston

Economy roundup

Consumers are growing in confidence that inflation is under control, according to the Melbourne Institute Inflationary Expectations survey released today.

The number of people surveyed who believe prices would rise declined 0.3% in the June survey, compared with the previous month. The number of people who believe inflation will fall within the target range rose to 17.4%, from 14.2% in a month earlier.

Business are less optimistic on the jobs front, with respondents to the Manpower–Melbourne Institute Employment Report saying they expect employment growth to slow over coming 2.8% in April to 2.4% in June and 2.2% in July.

Reserve Bank governor Glenn Stevens will make a speech today that the market will scrutinise for any sign that he is thinking of raising interest rates. Expect the dollar to go though the roof if he is seen as emphasising the inflationary risks in the economy.

At 12.25 am today the S&P/ASX 200 was up 0.9%, to 6239.3, and the Australian dollar was trading at US84¢, down on yesterday’s US84.06¢ close.

– Mike Preston

 

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