SMALL business enterprises are facing intimidatory tactics by major companies to whom they supply goods and services according to the Institute of Chartered Accountants in Australia.
SMEs are being asked to pass on arbitrarily determined cost savings and fully bear compliance costs upon implementation of the GST.
The ICAA said that evidence showed several major companies in the professional service and retail industries were notifying suppliers that they will be expected to provide cost decreases as a result of GST tax-related savings.
ICAA SME committee spokes-person, Sue Prestney said the result was that small businesses may be forced to pass on perceived cost savings from 1 July to their larger customers.
“This means SMEs will endure profit losses so larger customers can have competitive prices,” Ms Prestney said.
“Service providers such as cleaning and maintenance companies that deal predominantly in labour services will receive little benefit from tax-related savings which largely result from the provision of goods.
“As a result, prices must increase by the maximum threshold in labour intensive markets – because tax-related savings are so minimal.
“Those small businesses that choose to pass on their GST costs to some large companies will face the danger of being replaced by businesses who are in a stronger position to compromise their profit margins, making this a highly contentious issue that needs to be addressed,” Ms Prestney said.
“The actions of these major companies are setting standards for their main suppliers who, when faced with the option of either wearing the cost of the GST or passing it on, are issuing similar demands to their own suppliers.
“This means the businesses most likely to carry the additional financial burdens are the small operators – those who are in the least desirable position to do so,” she said.
“Should these tactics be allowed to continue unabated, Australian small businesses will be placed in a serious lose-lose situation come 1 July.”
