GST compliance

20 December 2000

After conducting more than 3,000 formal investigations into allegations of price exploitation and misleading and deceptive conduct in relation to post-Goods and Services Tax pricing, the Australian Competition and Consumer Commission is generally satisfied with the level of overall compliance to date by business with the GST provisions of the Trade Practices Act 1974, ACCC Chairman, Professor Allan Fels, said today.

However, Professor Fels warned that the ACCC would continue its close scrutiny of price changes especially over the Christmas-New Year period.

"We will not hesitate to act where we have concerns and complaints about price exploitation arising from the New Tax System changes".

The ACCC has received considerably fewer complaints about New Tax System issues than was originally expected, Professor Fels said. The number of matters followed up as a result of its own price checks, whilst large, is also below that expected.

"There were more than 35,000 complaints between 1 July 1999 to 30 November 2000 in relation to allegations of price exploitation and other GST-related contraventions which were considered by the ACCC. Many of these were not found to be breaches of the Act and many were multiples about the same businesses. Of these complaints, the ACCC commenced formal investigations into more than 3,000 complaints, approximately half of which involved alleged price exploitation".

More than 450 business have been required to take corrective action to remedy GST-related contraventions of the Act. These contraventions can be broken up into three main areas:

GST Enforcement Outcomes

1 July 1999 to 20 November 2000

Price exploitation (s.75AU)

145 cases

GST-exclusive price advertising

170 cases

Misleading and deceptive conduct

135 cases

Total

450 cases

"Total refunds paid to consumers or donations to charity after an ACCC investigation for GST-related contraventions have exceeded $5 million. More than 250,000 consumers have obtained these refunds, an average refund of approximately $20 per consumer.

"Other notable enforcement outcomes in this period include:

seven cases filed in court in relation to GST related contraventions by business – five of which have been settled;

32 cases resolved by the business providing court enforceable undertakings to the ACCC;

over 400 business have give administrative undertakings; and

trade practices compliance programs implemented/upgraded or trade practices compliance training undertaken by 58 businesses.

Price Exploitation

"The majority of price exploitation matters investigated by the ACCC arose as a result of businesses either experiencing technical errors with their GST implementation; or misunderstanding the effect of the GST on the supplies made by their business. Errors made by businesses included:

charging GST on GST free items, such as food, rechargeable phone cards, prescription medicines and treatments;

charging GST in the absence of a review opportunity in their contract which allowed them to impose GST on their customers;

charging GST in the absence of a clause in their contract imposing GST liability on the customer; and

charging GST on goods and services supplied, or goods available for collection, prior to 1 July 2000".

In most of these cases, businesses took a responsible approach by admitting their error and agreeing with the ACCC to take appropriate corrective action.

"A major area of GST refunds has been in the provision of lenders mortgage insurance. Other significant areas of ACCC investigatory activity include the supply of pre-paid funerals, car lease contracts, property sale agreements, and the supply of groceries by supermarkets. In each of these cases, the focus of the ACCC's enforcement action has been stop the conduct and to ensure that full refunds are paid to consumers immediately".

GST exclusive advertising

"A major focus of the ACCC's GST enforcement role has been to ensure that business advertise the GST-inclusive prices where goods and services are supplied to final consumers. Consumers should know the price they are paying for goods or services before they take any steps towards making their purchasing decisions. The ACCC is of the view that businesses have had long enough to ensure that their pricing is consistent with the ACCC's Price Exploitation Guidelines, which were issued in March 2000.

"A common complaint about GST inclusive advertising amongst some businesses is that they are concerned that if they advertise on a GST-inclusive basis they will lose sales as customers will believe they are more expensive. This type of response demonstrates why GST inclusive pricing is important and also why the ACCC has been actively ensuring that businesses do not advertise prices as GST-exclusive – namely that customers will be misled about the cost of goods and/or services and accordingly, make purchasing decisions on the basis of inaccurate information".

Misleading and deceptive conduct

"Before the introduction of the GST a main focus of the ACCC's GST enforcement activity was to ensure that businesses did not make misleading claims about the effect of the GST on their prices. Particular areas of ACCC concern were in relation to the sale of new motor vehicles and computer products and claims about the effect of the GST on property values.

"This area of the ACCC's GST enforcement activity has declined since 1 July 2000 with the exception of the building industry. In this industry, it would appear that many building companies made future representations, prior to the introduction of the GST, about the likely costs of home construction or likely completion dates for new homes. The ACCC has received numerous complaints from home buyers that these representations have not been honoured. Accordingly, the ACCC will be continuing to focus its enforcement activity on misrepresentations in this industry".

Achieving outcomes

"In resolving GST related contraventions the ACCC's primary goal has always been to ensure that consumers obtain refunds on a timely basis. However in some GST contraventions the payment of refunds directly to consumers has not been feasible. Accordingly, the ACCC has sought to devise creative remedies which will have the effect of compensating consumers. The following is a list of the more notable outcomes achieved by the ACCC:

Meriton Homes – misleading and deceptive representations about the value of apartments following the introduction of the GST – consent orders to cease misleading representations, offer refunds to consumers and implement a trade practices compliance program;

Franklins Limited – certain products discounted by 11% for three weeks after GST was charged on GST-free products;

Clarendon Homes – waiver of over $1 million of claimed GST on new home construction after representations that contract price was fixed;

Michael Hill Jewellers – donation of $10,000 to the Starlight Foundation in lieu of refunds for failing to pass on WST reductions;

Australian Leisure and Hospitality Group – 15% discount on certain alcoholic beverages for four weeks following incorrect application of Wine Equalisation Tax;

Wollongong City Council – free sports days at three leisure centres to compensate consumers for rounding up the effect of GST on council services;

Queensland Motorways Limited – toll free day at a number of tollways following misleading claims about the effect of the GST on prices;

Lander Toyota – compensation in excess of $42 000 to new car buyers for the failure to pass on WST reductions on new motor vehicles;

Cuisine Courier – undertakings to cease advertising GST exclusive prices for home delivery restaurant meals; and

University of Tasmania – undertaking to purchase computer equipment to value of more than $26 000 for the benefit of students in lieu of GST overcharge on Services and Amenities Fees for the 2000 academic year.

Release number: 
MR 359/00
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