Price increases not ‘automatic’ with GST

Press, 12 August 1985, Page 20

Price increases not ‘automatic’ with GST

PA Wellington Implementation of the goods and services tax does not mean that every item on retail sale will automatically increase in price by the amount of tax imposed. Emphasising this point at a Newspaper Proprietors’ Association advertising managers’ conference, the executive director of the Retailers’ Federation, Mr Barry Purdy, said the tax did not have to be 10 per cent of every unit sold. Taking a national GST level as an example, Mr Purdy said, “If a business sells $ll,OOO worth of goods, it has a tax liability of $lOOO to be paid between its suppliers and the State. “How that $lOOO was built into prices will be determined by competitive forces. It does not have to be 10 per cent of every unit sold.

“This is a critically irhportant factor in the Government’s proposals and it is not readily understood,” he said.

Mr Purdy said that contrary to popular belief, he did not think the main problem for retailing was administration of the GST.

“In the majority of cases, it will be simple, quite straight-forward and will require a minimum of extra work,” Mr Purdy said.

“That is, of course, if the Government adheres to, three basic principles.” They were: ® Acceptance of tax on a “global” basis and not on each individual item sold. 9 A single rate of tax

@ No exemptions. “Judging the market—that is, making forward buying commitments and determining prices in a competitive atmospherewill place a heavy burden on retail management. “Maintaining existing or adequate contributions to costs and profit will be a testing experience,” he said. Mr Purdy said advertising and presentation of prices, particularly in the first three months, would be important. “The federation will have no sympathy for those retailers who advertise misleading prices—by accident or intent. Nevertheless, the public must also recognise that thousands of articles on show and already priced cannot be repriced overnight,” Mr Purdy said.

“The variables are too great for the Government to try to regulate pricing policy. “However, I believe that the industry can and will develop some responsible guidelines for both pricing and advertising,” Mr Purdy said.