GST to hit core business development

Don't assume IT contracting costs will necessarily drop after the Y2K flurry is over or that the skills shortage will ease.

If the IT tax specialists are right, any introduction of a GST would keep costs high well into the future and seriously stretch limited staff resources.

And like Y2K work, software development preparations for introduction of the GST would again turn core business development - the sort that actually makes money for the organisation - into a low priority.

A detailed analysis of the implications of the Howard government's tax reform plans by Deloitte Touche Tohmatsu partners Mark Sercombe and Jim Morrison has found businesses are currently focusing on the system changes necessary to calculate GST. But the partners warn many have forgotten that existing systems will also need to be modified so they stop calculating payroll tax, stamp duties and so on.

"Core business is again a low priority for IT with first Y2K and now the GST. System development will again be 'hijacked' by a set of changes that don't make any money for the organisation. The really useful systems changes that managers want so they can better manage risks or spot opportunities will continue to be graded as a lower priority," the partners said.

"As the implementation date of the GST gets closer, there will be a flood of business transactions. However, some existing systems may not be able to handle this volume of transactions, as for example the TAB on Melbourne Cup Day.

"The volume of transactions will be exacerbated as most organisations will have their IT people busy focusing on getting the GST changes through."

The analysis also finds:

· Retail software suppliers may be disadvantaged, with retail software becoming more expensive;· The government will find it hard to apply GST to software acquired over the Internet where the supplier is based outside Australia, thus causing a significant disadvantage for local retailers;· Software suppliers to the commercial sector should come out slightly ahead.