An art full of dodgers
- 19 May, 1999 13:05
It will be a long and painful process if we have to wait for a Federal Government solution to the problem of dodgy computer dealers. Gerard Norsa asked the channel whether the industry has to tackle the problem itself.
Dodgy dealers, shonks, fly-by-nighters or just plain tax cheats. Call them what you may, but these are only some of the printable tags that have been attached by an ever-despairing industry to a minority element in the reseller channel which has an agenda other than fair trade.
Far more descriptive terms have been used by legitimate traders struggling to compete against those who are less scrupulous in their attention to the minimal rules and regulations governing the industry.
So far, nobody has been able to come up with a definitive solution to the preponderance of shady characters and disappearing businesses at some levels of the computer industry.
Perhaps the spokesperson we contacted at the NSW Department of Fair Trading described it best.
"It is a state and national issue," he said. "Everybody should be concerned about it. It is important for the country that people get good quality computers at an equitable price. We have to get smart and compete on the international economic stage. We must be a computer-literate country."
Broadly, there have been two major problems in the industry - tax evasion and disgruntled or ripped-off customers. Often they operate hand-in-hand with each being as serious a problem as the other.
If it is not the Tax Department missing out on revenue it is the poor first-time buyer being sold substandard equipment and asked for up-front payment or large deposits and then not getting what they paid for.
Worse still, some of the masses almost stampeding to part with their cash are getting totally left out to dry as dealers come and go as quickly as the technology they peddle.
The explosion in the sales of computers and related products over the last 2-3 years means there is a huge treasure chest at stake and many a pirate has been man- oeuvring to get their hands on some of it.
The $64 billion question is: just what can be done about the "dodgies" that are causing such pain to unsuspecting customers and legitimate traders?
As you would expect from the IT distribution channel, opinions vary greatly. One common answer to emerge is that tackling the problem will be difficult but is essential.
Some said government and other regulatory bodies need to introduce tougher penalties while others feel the industry needs to take full responsibility for the problem to circumnavigate painfully slow government bureaucratic processes.
Tighter controls on cash and other large transactions have also been suggested while others are just pining for the arrival of a GST, claiming it will become a grim reaper on the tax avoidance problem.
It has even been proffered by one person that the "Babe Ruth" approach should be taken. "After all, you can do a lot of damage with baseball bats," it was said.
Brendan Walsh, marketing director of catalogue trader PAW Products, is a firm believer that a GST will go a long way towards kerbing the problem. "It will definately whittle away at it," Walsh said of tax evasion. "Initially there will be problems, but many shonky dealers will get shut down very quickly."
However Ross Whitelaw, managing director of cooperative group Leading Edge Computers, is a little less sure. Whitelaw, who spent "plenty of time" in New Zealand when with Dick Smith Electronics, said thankfully he has no memory of any great tax evasion problem over there.
"However, I do remember Kim Beazley saying retail taxes have fostered a black economy in Europe," Whitelaw said. "At the time, I didn't think that would be possible, but maybe he was right."
Meanwhile, Harris Technology's managing director Ron Harris is unconvinced a point-of-sale tax will stem the activities of miscreants.
"Without thinking too hard, I can see many potential loopholes in a GST," said Harris. "But at least we know the rate is smaller so it is not so much of an issue."
Harris sees the answer to catching tax-evading dealers being more focus by the Tax Department and a systematic rooting out of dodgy companies and fallen company directors. "Just as we have to in business, the Tax Department and other regulatory bodies have to focus on getting rid of tax cheats one by one, whenever and wherever they pop up."
From past experience, Harris felt the Tax Department needs to improve the method by which it receives information about unusual pricing and activities. It then also has to move faster against any suspects.
"They need to be consistent and there has to be a better reporting mechanism. We still don't even know who we should report to," Harris said. "When they [the Tax Department] see or hear about a hole in their system, they should immediately stick a finger in it. It all seems to take too long."
Yet another solution came from Lindon Rose, proprietor of Bunbury's Masterlink Computers in regional Western Australia. He suggested that maybe some sort of stored data card should be used by all that want to buy or sell tax exempt.
"It works for Medicare and it works in the banking industry," Rose said. "Everyone who is involved with tax-exempt transactions should have a card, like a smart card or a credit card, which is used to record all details. If you don't have one, you shouldn't be allowed to sell with a tax exemption."
Meanwhile, Whitelaw feels the biggest facilitator of tax evasion is the cash eco-nomy and that closer regulation of sales by suppliers could be an answer. "It works in banking," he said, pointing out how all transactions over $10,000 need to be accompanied by explanatory documentation in that industry.
"We have to tighten up the cash economy and hopefully a GST will go a long way towards doing that," Whitelaw said.
When addressing the problem of consumers being ripped off, Whitelaw and IDC analyst Bernie Esner both felt a Commonwealth body should be established to take control of the situation. At the moment, disgruntled consumers are mainly being handled by the various state Fair Trading departments. All of them operate under different procedures and with disparate laws and penalties governing their activities, they argued.
Esner also felt it might be worth considering an accreditation process for dealers, such as those operating in the motor and building trades. That could be initiated by either vendors or government, he said.
"We all know how difficult government departments find it to communicate with each other," Esner said. "It has got to be a Commonwealth body that takes ownership of the issue and then does something about it.
"The industry we are in moves so rapidly and we need somebody at a national level to focus on keeping pace with it all. It always makes me a bit nervous though, when we rely on government to change things," he added.
Walsh agreed. "The industry moves way too fast for government to keep up. We [the industry] have to do it by ourselves. Government is always playing plug the hole and until such time as there is real international regulation, we can only treat each case on its merits."
Walsh added that the fate of each individual dealer is in its own hands. "We are increasingly becoming a service industry," he said. "If people can build good brand recognition and provide good service, then they will have success.
"You can still establish confidence with end users if you put the effort in and that in itself could be seen as a solution to the problem. If we [legitimate traders] provide better service, people will come to expect it."
Renee Lawrence, general manager of Melbourne dealer Computers Now, is one who strongly believes that the vendors themselves have to take more responsibility for reseller behaviour in their channels.
Originally an Apple-only dealer, Computers Now took on some PC products for security when "every second customer started asking if Apple would be around in two years".
Enjoying a renaissance in confidence for Apple product, Lawrence said there is a lot to be learned from its channel model.
"I think pressure from vendors would carry a lot of weight," Lawrence said. "Apple is very good at qualifying who it allows to sell its product.
"There aren't any similar problems in the Apple channel so maybe it would help if other vendors had a similar sort of attitude."
As managing director of Brisbane's TechXpress, Ian Moriarty is one of the many dealers just looking for a level playing field, but he's not holding his breath.
Moriarty feels that legitimate traders can't do much about shonky dealers that arrive in a blaze of glory, promise the world, and then do a runner in a cloud of receivership. The good guys are too busy trying to reinvent themselves, he says, and still feels the best options are in educating consumers.
"There is always room for education," Moriarty said. "Surely the customer has to take some responsibility for having to evaluate his source of supply.
"If they take the cheapest price on offer, then let the buyer beware," he added.
In NSW, the State Government is attempting to look as though it is doing something. The recent State Election was followed by a cabinet reshuffle which included the appointment of a new Fair Trading Minister, John Watkins.
A DFT spokesperson said Watkins has been made fully aware of the consumer problems that have been prevalent in the PC industry and wants to do something about it. Whether it is too little too late remains to be seen.
When the new NSW Parliament's first session gets under way this month, legislation based on one of the top recommendations to come out of last year's computer dealer inquiry will be introduced. According to the DFT, it is based on extending existing laws to include a "substantiation clause". Fundamentally, this requires dealers to "put up or shut up".
"Where dealers have been making claims that are too good to be true, we can now ask them to immediately prove they can meet the offers being advertised," the DFT spokesperson said. "They have to be able to account for themselves."
The DFT is also claiming it will no longer be allowing companies to rack up "high levels" of complaints in the future.
"People have been going under with too many dissatisfied customers," the spokesperson said.
"We won't let a Perry Tait happen again," he added, referring to a nationally advertised cheap PC operation that went down in a blaze of publicity and broken promises late last year.
There is also going to be some "large-scale advertising in NSW" by the DFT, the spokesperson said, to help educate people "about the purchasing of computers and what traps to look out for".