Has GST wiped out the dodgies?

Has GST wiped out the dodgies?

More than six months into the new tax regime, debate is still fierce over whether the GST has been successful in flushing out one of the infamous bug bears of the computer industry - the dodgy dealer.

Legitimate resellers have credited the GST with helping to make their retail businesses more competitive and wiping out dealers who cheated on the 22 per cent wholesales sales tax. But instead of disappearing, many of those dealers are simply closing their doors and reopening under different business names, leaving behind a string of bad debts and voided warranties.

According to Chris Kopparis, sales manager of distributor ACS Computer, the introduction of the GST has gone some way to catching the bigger players, but a lack of accountability is still allowing the smaller companies to slip through the nets.

"The cheats stay in business until the first BAS is due, then they shut up shop, change names, continue to work and the customers lose their warranties."

Kopparis said trying to close down these operations was like "spitting against the wind" since the money that can be made from avoiding tax far outweighs the penalties for being caught.

"Even if they went to gaol, they still have five or 10 million dollars in their pocket. There isn't enough accountability in the industry - that's the big thing."

Making directors liable for unpaid taxes could help the problem, he said. "It is too easy for them to close up and start again two doors down, leaving behind a stack of unpaid bills and warranties," he said. "It really hurts small dealers because they just can't compete and it puts a bad name on the industry."

Regardless of this, the GST has made enough difference to the market to allow resellers such as the Mercury Group to move into Melbourne. The opening of its Laptop Land retail arm was in part spearheaded by a more competitive atmosphere in a city renowned for its dubious dealers. According to Mercury Group MD Derek Merdith, many of those companies have now disappeared from the market place, he said, with trading publications such as the Green Guide now a fraction of their previous size.

"With the nature of the GST now, the most tax you can get out of is a couple of per cent because GST is paid all along the way. A couple of companies have probably survived but are now more legitimate as a result."

Kopparis, however, questioned whether the size of the Green Guide is a reliable indicator.

Sydney-based retailer Tony Prince from Complus Computers in Leichhardt, is also sceptical of the affect the GST has had on cleaning up the industry. "For the first two quarters after GST introduction, we did far more business than in the previous year, because suddenly quite a few dealers in the area closed down," he said.

Prince wonders whether the GST has had a direct or indirect role in the closure of many businesses but he does admit that, as a legitimate business, the new system has made it easier for him to remain competitive.

"There are still those dealers out there, but I don't know how they do it. Why would you buy products ex tax when you can claim back the GST anyway?"

Melbourne reseller Centari Systems, managing director Jon Johnston is also a fan of the new tax system. "We don't do the retail side anymore, but five years ago we did and at that time sales tax evasion was rampant," he said. "We did around 40 per cent of our business in that market and it cost us millions. For that reason I have always been a huge believer in the GST. The reality is it is a lot easier to administer than wholesale sales tax."

Photograph: ACS Computer sales manager Chris Kopparis.

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