New incentives to comply with the GST law

The Government has chosen a clever way to ensure that the Goods amp; Services Tax will be complied with, says Professor Bob Baxt.

When it enacted the Goods & Services Tax legislation, the Federal Government sought a comprehensive mechanism to ensure that the community responded positively and pro-actively in complying with this legislation. It chose to rely on the Australian Competition & Consumer Commission rather than the Australian Tax Office to ensure that this was achieved. In doing this it enacted Part VB of the Trade Practices Act (the Act) which contains a range of significant powers vested in the ACCC to ensure that the legislation will be complied with by a vast cross section of the community. The ACCC has recently published its revised GST Guidelines which it hopes will ensure that the business and general community will, in fact comply with this legislation. One of the main weapons chosen by the Government to ensure that this was achievable was to empower the ACCC to issue what are known as price exploitation notices when it forms the view that an organisation is engaged in price exploitation as defined by the legislation.

However, in this writer's view, this price exploitation regime is unlikely to be successful because of the difficulty in establishing the elements of price exploitation (it is always difficult to establish in a court of law some of the economic issues that are part and parcel of this prohibition). In this context, and perhaps recognising that it would need a more effective way of achieving compliance with the legislation, the Government has introduced a Bill to amend the Act and by creating a new offence for misleading and deceptive conduct in relation to the GST. This proposed legislation, once enacted, will create significant penalties for misleading and deceptive conduct - $10,000,000 maximum for corporations and $500,000 maximum for individuals who engage in either misleading or deceptive conduct or false representations with respect to the Goods & Services Tax. Section 52 of the Act, which prohibits misleading and deceptive conduct does not carry any civil penalties with it. Damages can be sought by private plaintiffs and the ACCC may seek injunctions or some similar awards in appropriate cases. The courts have interpreted the concept of misleading and deceptive conduct very widely - even silence may constitute misleading and deceptive conduct in appropriate circumstances.

The Government has chosen a very significant and clever way to ensure that the Goods & Services Tax will be complied with across all sections of the community. Even if the ACCC cannot establish that price exploitation exists in many situations where it will be arguing that such is the case, with some imagination it is my view that a claim for misleading or deceptive conduct or misrepresentation may be far easier to establish in the appropriate circumstances. For some two and a quarter years yet the provisions of the Act dealing with the Goods & Services legislation will remain one of the most important and high profile areas for the work of the ACCC and all companies and their directors will need to ensure that they comply with that legislation.

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.