LETTERS TO THE EDITOR: Dealers rort tax system

LETTERS TO THE EDITOR: Dealers rort tax system

Dear ARN,

I wish to comment on the article titled "Has GST wiped out the dodgies" which appeared in the March 7 issue of ARN.

I am a great supporter of the principle of GST, and a not so great supporter of all the extra work it involves. Yes, we are the unpaid tax collectors of the government.

GST has been good in that it helped to remove the hidden 22 per cent profit margin that unscrupulous dealers made by avoiding tax. The maximum that margin can be now however is 10 per cent, so in that respect the playing field has become slightly more level - before it was an uphill battle.

But GST avoidance is alive and well in certain sectors - namely those who import from overseas and sell directly to the consumer for cash.

A few months ago I visited a "computer market" - which is an experience in itself. They are supposed to be a venue for amateurs and very small traders to sell pre-loved and end-of-line goods to the end user. Instead I saw some very familiar faces from major importers selling all manner of new goods at prices that were about equal to our cost price (inc GST).

I sidled up to one "stall holder" that I knew who was selling "brand name" computer speakers. He confided that he imported them from his uncle in China, who shipped them "inside the PC case" along with a host of other items. He did not declare them to customs and paid GST only on the imported value of the PC cases.

So the goods arrived in Australia without a trace. He then had to sell them directly to the end user for cash in order to avoid GST. The money was then shipped out of Australia (he did not say how but he frequently visits home) to a country where income tax is much lower or non-existent, and GST does not apply.

When I asked if I could get a tax invoice for my "purchase" he said, "Sure", and scribbled an ABN number in a carbonised receipt book. I later checked the ABN at only to find that it belonged to a West Australian fishing boat. But for all intents and purposes that receipt was genuine, and the business consumer would probably be able to claim the GST component back from the government, thus ripping off the tax system as well.

This is not the only example of GST avoidance either. You just have to read the "IT shopper" section in any town to hunt down the "bargains".

I rang a supposed "private sale" and discovered it was a well-known dealer selling a brand name printer that costs State distributors $193 ex GST (RRP $279) for $225. We got talking over the phone and he admitted that he claimed the 10 per cent ITC from the government (earning him $19.30) and then sold it for cash (no receipt), earning him a clear $51.30. A legitimate dealer is flat out making a $25 profit on the same item. He seemed to be proud that he was selling below the other retailers and making more by ripping off the government.

Now he is stuck with the cash, but provided he uses it to buy food for his large extended family and staff (no GST and not traceable), or somehow remitted it overseas, it would be untraceable. Of course the dealer could not do this too often as his GST claims would exceed his GST collections and the government would get suspicious (not bloody likely).

Perhaps that also explains a spate of so-called "robberies" lately. First you claim the goods on insurance and then you sell them on the black market at the aforementioned computer markets.

Just how widespread is this? In the one hour I was at the computer market, the speaker vendor sold more than 50 sets of speakers at around $50 each. Given that the market runs two days a week, eight hours a day, the potential income on that one product is $40,000, and he easily does this every weekend. I suggest that all legitimate dealers and retailers visit the local computer market and prepare to be shocked.

Ray Shaw

Managing Director

Intermedia Group of Companies

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