POPULAR WORDS

Labor's promised simplification of the GST reporting and reconciliation process will result in some small businesses paying too much GST without recourse to reconciling their true tax liability, claims Small Business Minister Ian Macfarlane. "(Shadow Treasurer) Mr (Simon) Crean's proposal has all the hallmarks of an ACTU leader's understanding of small business," he says. "To offer all small businesses the ability to calculate GST liabilities using a ratio based on previous net GST paid, whilst Labor rolls back the GST, leaves open the possibility that small businesses will pay more GST than what their actual liability amounts to under a rolled-back GST. "Under Labor's promised method, small business would have no way of knowing the degree of their overpayment because Labor will not allow small-business people the opportunity to complete an annual reconciliation." For example, Macfarlane points out that if a newsagent opts to use the Opposition's proposed method – which would see its GST payment for 2001/02 based on its 2000/01 payment – at the same time as Labor exempts books from the GST, then the number of items on which the newsagent collects GST will fall. "The ratio the newsagent uses, however, will be based on a broader range of products, resulting in a higher GST payment than is actually required," he claims. "Labor has trumpeted the removal of the need for an annual reconciliation as a step toward simplification. "In fact, all this will do is increase uncertainty and take extra cash out of small business through GST payments for which the firm is not actually liable."