PURPOSE
1. The Australian Competition and Consumer Commission ("ACCC" or "Commission") is required under subsection 75AV(1) of the Trade Practices Act 1974 ("the Act") to prepare Guidelines on the application of section 75AU of the Act. Section 75AU prohibits price exploitation in relation to the New Tax System changes incorporated in legislation passed in June 1999.
2. This document consists of four parts:
3. The Guidelines have been designed to be both general and simple to apply and understand because of their broad application across all sectors of the economy and to businesses of all sizes and kinds. It is anticipated that for selected issues and industries additional specific guidelines may be developed.
A NEW TAX SYSTEM
4. In August 1998, the Commonwealth Government proposed A New Tax System for Australia.1 Legislation to give effect to this policy was passed by the Parliament in June 1999. The legislation introduces, among other things, personal income tax cuts and a broad-based goods and services tax ("GST") to replace a number of existing indirect taxes and remove anomalies and complexity.
5. The New Tax System changes will affect the prices that businesses (or 'suppliers') charge for goods and services in virtually all industries. The effects will vary with some prices falling and some prices rising. The Government intends that consumers should benefit fully from reductions in indirect tax, and that they should not be exposed to greater than necessary price rises. There should be no exploitation of consumers.
6. Therefore, the Government has established - during a transition period - a price oversight regime which prohibits price exploitation in relation to price changes brought about by the New Tax System changes: the ACCC has special powers in relation to this legislation.
ACCC'S ROLE IN THE NEW TAX SYSTEM
7. Part VB of the Act prohibits price exploitation in relation to the New Tax System changes and confers a number of statutory responsibilities on the Commission. Those responsibilities include to:
| formulate guidelines about when prices for regulated supplies
contravene the prohibition on price exploitation;
| monitor prices;
| issue a notice when the Commission considers a business has
contravened the prohibition on price exploitation;
| issue a maximum price notice to aid prevention of price exploitation;
| take court enforcement action; and
| report to the Minister each quarter about the operations
of the Commission in the period.
| |
8. The Commission considers that well informed, competitive markets operating in a climate of low inflation and good corporate citizenship generally will ensure that the vast majority of businesses will act fairly. However, it will not hesitate to use its enforcement powers if there is price exploitation in breach of the Act.
9. In performing its oversight role, the Commission will seek to achieve the aims of the legislation in the least costly ways possible to business and the community. The Commission will be able to:
| provide information to market participants;
| monitor price movements;
| investigate complaints and issues of public concern;
| obtain information about prices and pricing decisions;
| report publicly;
| issue a notice specifying maximum prices to aid in the prevention
of price exploitation;
| issue a notice of price exploitation; and
| undertake court enforcement action.
| |
10. The level of penalties for breaches of the new legislation reflects the Government's concern to ensure that no business takes unfair advantage of the New Tax System changes. The Federal Court may impose pecuniary penalties up to $10 million for corporations and $500,000 for individuals for breaches of the price exploitation provisions.
11. These penalties apply also to persons who are knowingly concerned in, or aid and abet, a contravention of the Act. Advisers to businesses (including lawyers and accountants) need to be aware that the Act provides no protection for advisers found to be involved in price exploitation in breach of the Act.
TRANSITION PERIOD
12 The transition period during which the ACCC has exercised oversight of pricing commenced on 9 July 1999 and extends to July 2002.
TAX CHANGES COVERED BY THE PRICE EXPLOITATION GUIDELINES
13. The regime, including the Guidelines, will cover the following taxation changes:
| a reduction in the Wholesale Sales Tax ("WST")
rate of 32 percent to 22 percent (29 July 1999);
| introduction of the GST (1 July 2000);
| abolition of WST (1 July 2000);
| changes to excise on petrol and diesel and to the Diesel
Fuel Rebate Scheme (1 July 2000);
| changes to excise on alcoholic beverages (1 July 2000);
| changes to excise on cigarettes (from 1 November 1999);
| introduction of a ‘Luxury Car Tax' (1 July 2000)
| abolition of bed taxes (1 July 2000)
| abolition of State taxes on bank transactions (financial
institutions duty, debits tax) and stamp duties on business related
transactions (date to be determined).
| |
REDUCTION IN WST FROM 32 PERCENT TO 22 PERCENT
14. As from 29 July the WST rate for goods listed in Items 4 to 14 of Schedule 5 of the Sales Tax (Exemptions and Classifications) Act 1992 will be reduced from 32 percent to 22 percent. These goods include the following:
| tape recorders, video recorders, radios, televisions and
stereo players;
| watches, clocks, watch bands;
| cameras, including video cameras (but not film);
| binoculars and opera glasses;
| photographic enlargers;
| film and slide projectors, viewers and screens;
| picture tubes for television receivers;
| automatic photo booths;
| slot machines for gambling and amusement operated by coins
or tokens;
| studs, tie pins and cuff links;
| precious metal goods and plated ware; and
| parts for many of these goods.
| |
15. WST liability generally arises on the sale of a taxable good by a wholesaler to a retailer. The wholesaler collects the tax and forwards it to the Australian Taxation Office. As a result, retailers generally do not collect the tax. Certain categories of goods, buyers and uses are exempt from paying WST. These exemptions remain and, hence, the reduction in the rate payable will have no effect in these cases.
APPLICATION OF THE GUIDELINES
16. Subsection 75AV(1) requires that the Commission must formulate written Guidelines about when prices for regulated supplies may be in contravention of the prohibition on price exploitation.
17. The Commission must have regard to the Guidelines when issuing, varying or revoking a notice that price exploitation has occurred (under section 75AW) or a notice to aid prevention of price exploitation (under section 75AX).
18. A notice under section 75AW will constitute prima facie evidence in proceedings by the ACCC to seek penalties or obtain an injunction that the price charged is unreasonably high. The Commission may vary or revoke the notice on its own initiative or on application by the corporation. The Commission must give the corporation notice in writing of the variation or revocation.
19. A notice under section 75AX may specify a maximum price that, in the Commission's opinion, may be charged for a supply. The notice must specify the period over which the maximum price is to prevail. This period can be up to the end of the transition period.
20. The Commission may publish a section 75AX notice in a manner it considers appropriate, including, for example, in a national newspaper. Notices under section 75AX are required to be reported in the ACCC's quarterly report to the Minister.
21. The Commission considers that supplying goods and services above the maximum price will constitute price exploitation.
22. The Federal Court may have regard to the Guidelines in any proceedings relating to alleged price exploitation.
THE OFFENCE OF PRICE EXPLOITATION (THE 'STATUTORY PRINCIPLE')
23. Section 75AU of the Trade Practices Act 1974 outlines the broad statutory test in relation to price exploitation during the transition period. This test provides the underlying principles on which the Guidelines are based. Section 75AU is reproduced below.
THE COMMISSION'S FOCUS IN EVALUATING PRICES
24. It is the Government's intention that consumers should benefit fully from reductions in indirect tax and should not be exposed to greater than necessary tax related price rises. There should be no price exploitation of consumers.
25. In line with the Government's intention, the Commission will examine how prices move in relation to the New Tax System changes. The Commission's focus is on prices set by individual businesses and is primarily on changes in prices resulting from the tax changes, not on the level of prices.
26.For example, a wholesale business before the reduction in the WST from 32 percent to 22 percent may have set a tax-inclusive price for a television of $800. The rate change would reduce the tax impost by around $60. The Commission will be concerned then to ensure that the $60 cut is fully reflected in the price with a commensurate decline to $740. It will not generally be the Commission's role to assess whether the $800 price was justified in the first instance.
27.The Commission's focus on price changes rather than levels emphasises the point that the New Tax System changes are not to be seen as an opportunity for businesses to raise profits, even where profitability may be low.
28.The Commission recognises the crucial role of competition in protecting the interests of consumers. Where effective competition is present it will be more difficult for businesses to sustain price exploitation. Because of this the Commission will particularly, but not exclusively, focus its scrutiny on situations where businesses have substantial market power. It should be noted, in this regard, that the emphasis of the Act, especially subsection 75AU(2)(b), reflects a concern that prices should not increase by more than the amount of a tax rise and should fall by at least the amount of any tax fall in any market.
29.The New Tax System changes involve the elimination of the existing WST and other indirect taxes and introduction of a GST. Removal of taxes on manufacturers and wholesalers should have flow on benefits for businesses closer to the final consumer. It is important that businesses assess not only the direct impact on their own businesses of the tax changes but also the benefits they should expect to have passed on to them by their own suppliers. If the benefits are not provided by suppliers, it is desirable that the Commission be informed.
30.Whilst a key focus for the Commission will be consumer markets, there will also be active monitoring of businesses in upstream markets for compliance with the Guidelines. This is consistent with the legislation which is not limited as to the type of markets it covers.
LIAISON WITH OTHER PRICING REGULATORS
31.The Commission will liaise with other regulatory agencies to ensure that there is not an excessive pass through of the effect of tax changes into prices, especially where regulated prices are linked to movements in the Consumer Price Index. The Commission itself has some price regulation responsibilities and will act to ensure that there is no excessive pass through of tax changes into prices in areas of its responsibilities.
CONSULTATION AND DEVELOPMENT OF THE GUIDELINES
32. The Commission has consulted widely with interested parties on the development of these Guidelines. Preliminary Draft Guidelines were made public, many submissions on these Guidelines were received and extensive discussions were held with interested parties. The views expressed to the Commission have been taken into account in the preparation of these Guidelines.
33.Subsection 75AV(2) of the Act enables the Commission to vary the Guidelines. This would allow the Guidelines to deal with emerging issues and to reflect the experience of their application.
34.Where further changes to the Guidelines are considered, the Commission will again seek to consult with representative bodies and individual organisations and persons, as appropriate.
PART 2 - THE GUIDELINES
INTRODUCTION
35.This Part sets out the Commission's position in respect of subsections 75AV(1) and 75AV(3) of the Trade Practices Act 1974 ("the Act").
36.Section 75AV(1) of the Act requires the Commission to formulate written Guidelines about when prices for regulated supplies may be regarded as being in contravention of the price exploitation provisions contained in subsection 75AU(2) of the Act.
37.Section 75AV(3) requires the Commission to have regard to those Guidelines in making decisions under section 75AW or 75AX in relation to the issue, variation or revocation of notices under those sections.
THE STATUTORY TEST FOR PRICE EXPLOITATION
38.Section 75AU of the Act outlines the broad statutory test in relation to price exploitation during the transition period of the New Tax System changes. This test provides the underlying principles on which the Guidelines are based.
39.Section 75AU of the Act states that:
40. Section 75AU relates to corporations. States and Territories have agreed to introduce complementary legislation that will ensure full coverage of all businesses covered by the New Tax System changes.
41. The legislation imposes three tests about whether price exploitation has occurred. These are:
42. In determining whether price exploitation has occurred, the Commission will have regard to a number of criteria relevant to each of these matters. The Commission's approach to these matters is detailed below.
43. A 'regulated supply' refers to a good or service subject to the New Tax System changes that has been supplied in the transition period. Section 75AT of the Act defines a 'regulated supply'.
44. In general, the vast majority of goods and services supplied by businesses operating in Australia will be covered by the definition. The full definition is reproduced at Appendix A.
45. The Commission will have regard to both the quantum of price adjustments and the timing of these adjustments in response to the New Tax System changes.
46.The Guidelines, in summary, are:
| prices should be reduced immediately to pass on the full
effect of the tax reductions;
| any increase in price based on the GST should include a full
offset for other indirect tax reductions;
| no markup should be applied to the GST component of price;
| prices should reflect only actual, not anticipated, tax increases;
and
| businesses should not take the opportunity to increase the
difference between cost and prices in dollar terms (the dollar
margin rule).
| |
Size of price adjustments
47.The legislation does not prevent businesses from adjusting prices to reflect the New Tax System changes. However, it seeks to prevent overrecovery of tax changes either from raising prices too high or not reducing them enough. This translates into a simple rule that businesses should not increase the net dollar margins on their goods and services as a result of the New Tax System changes alone. Net margin is defined in unit terms as being equal to the sale price less the cost of goods sold and operating and selling costs.
48.If the net effect of the New Tax System changes is to raise costs, the constant net dollar margin rule implies that prices should be able to increase by no more than the dollar rise in costs. Equally if costs fall prices should at least fall by the same dollar amount. The rule does not require that businesses incur a decrease in dollar net margin as a result of the New Tax System changes alone. 2
49.The following simplified examples show the application of the dollar pass through rule in the context of:
| a reduction of the WST from 32 percent to 22 percent for
certain goods;
| imposition of the GST in isolation from any other tax changes;
and
| simultaneous removal of WST and imposition of the GST.
| |
Example 1 Reduction of the WST from 32 percent to 22 percent
| Before the change ($) | After the change ($) | Percentage change | |
| Wholesaler's price |
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| WST |
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| Cost to retailer |
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| Retailer's markup |
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| Retail price |
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50. In this example before the tax change the retailer is assumed to apply a 10 percent markup to the buying cost of the goods to cover operating and selling costs and provide a margin. A full pass through of the tax reduction occurs from the wholesaler to the retailer and from the retailer to the consumer. Because the retail price includes the retailer's markup, the percentage reduction in retail price (6.89%) is smaller than the percentage reduction in the wholesale tax-inclusive price to the retailer. The retailer's markup and margin is unchanged on the assumption that there are no other cost changes occurring. If, in addition to the tax change, there were other tax related cost changes these would need to be passed through into the price and accommodated by a change in the dollar markup.
Example 2 Introduction of a GST with no other tax changes
| Before the change ($) | After the change ($) | Percentage change | |
| Wholesaler's price |
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| GST |
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||
| Cost to retailer |
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| GST input credit |
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| Retailer's markup |
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| GST |
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| Retailer's price |
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51. This example shows the impact of the imposition of a 10 percent GST. The GST is included in the wholesaler's price to the retailer, but the retailer is able to obtain an input tax credit for this. The retailer effectively adds the GST to the buy-in cost of the goods (excluding the wholesalers' GST component, which qualifies as an input tax credit) plus the retailer's margin. There is no margin added to the GST and the retailer's dollar markup is unchanged. On the assumption that there are no other tax related cost changes, the retailer's margin will also be unchanged. This example may typically apply to the supply of services, where no indirect tax has applied in the past, although even here some reduction in operating and selling costs could be likely to occur through the elimination of WST on some purchases.
Example 3 Simultaneous elimination of WST and introduction of the GST
| Before the change ($) | After the change ($) | Percentage change | |
| Wholesaler's price |
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| WST |
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||
| GST |
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| Cost to retailer |
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| GST input credit |
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| Retailer's markup |
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| GST |
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| Retailer's price |
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52. This example assumes that the retailer before the change applied a 10 percent markup to the purchase cost of the good that is taxed at the 22 percent WST rate. The markup is maintained in dollar terms after the tax change. The net tax change (22.00-11.22=10.78) is fully passed on into the final retail price to the customer (134.20-123.42=10.78). The decline in the retail price as a result of replacing the WST with the GST in this case is 8.03 percent.
53. The constant dollar margin rule applies symmetrically. In this example, the margin as a percentage of costs to the retailer rises. However, when the effect of the tax change is to increase the costs, the margin will fall in percentage terms. The rule is likely to have the desirable incentive effects of encouraging businesses to obtain cost reductions from their suppliers and of tightening resistance to supplier cost increases.
| Costs of complying with the New Tax System changes |
54. Consistent with the principle that businesses should not incur any decrease in dollar net margins as a result of the New Tax System changes alone, businesses will be entitled to recoup compliance costs associated with the New Tax System changes.
55. Additional costs in complying with the New Tax System changes are likely to be offset in part or whole by savings in not having to deal with the existing tax regime and by any additional assistance provided by the Government to meet the new compliance costs.
56. The Commission's position is that businesses should be able to recover in their prices any net additional compliance costs reasonably incurred. Where these costs are of a capital nature, such as for new accounting systems, it is expected that any cost impact on prices would be spread over a number of years in line with generally accepted accounting depreciation rules.
| Product definition |
57. In applying the constant dollar margin test, the Commission will have regard to existing practice in individual businesses in relation to product definition. As a starting point it will look to assess margin movements on an individual good or service basis. However, if it is necessary to consider movements for a wider basket of goods and services it will seek to be assured that the allocation of cost or tax changes across products is not taking advantage of market power or is detrimental to competition in markets.
58. There is no justification for a company spreading the price changes across taxable supplies that include those items that are subject to GST and those that are GST-free. For example, the Commission is of the view that a grocery retailer cannot average cost increases across GST and GST-free grocery items.
| Pricing points |
59. Where the implementation of the New Tax System changes results in prices that are not consistent with established product pricing points, eg. $1.99, $2.99 etc., prevailing market practices regarding pricing points may apply unchanged. If the prices of some product categories are increased to meet particular pricing points, the prices of other product categories should be reduced to offset the increases. The effect on net margins overall of repricing to pricing points should be nil.
| Base for comparison |
60. In most cases, the base period for applying the margin test will be the period immediately preceding the tax changes. However, the Commission will seek explanations for price changes that occur prior to the tax changes and which appear to have the effect of maintaining business pre tax change price levels after adjustment for the tax changes.
61. In respect of the WST rate reduction from 32 percent to 22 percent on 29 July 1999, the Commission will examine wholesale and retail prices immediately before and after the tax changes. It will also consider price movements over a longer time frame to be assured that there is no attempt by businesses to retain the benefits of the tax cuts or to increase prices to capture these benefits later.
62. In respect of goods and services subject to the GST, the Commission will compare margins prevailing immediately before the GST with those prevailing after the GST. The impact of the elimination of WST and other tax changes at the time will also be taken into account. Again price movements over a longer time frame will be considered to ensure that there is no attempt to take advantage of the New Tax System changes by setting prices that are higher than justified by the tax changes.
| Influence of competition |
63. An important consideration in assessing these longer-term movements in prices may be the nature of competition in the relevant markets. If effective competition prevails, there will be less concern about the possibility of price exploitation. Businesses will be undercut by other competitors or potential competitors if they set prices too high.
| Consideration of longer term price movements |
64. The Commission will also consider both dollar and percentage margins in any assessments of longer-term price movements.
| No Markup on GST |
65. No margin or markup may be applied to the GST component of price. The GST is applied to the price after the margin has been determined and is equivalent to one-eleventh of the GST-inclusive price.
66. Where an input tax credit is available to a business, the GST component must be removed before a margin is added.
67. The Commission will expect to see price adjustments occur immediately after tax changes are implemented. Prices should also be adjusted as soon as tax change related indirect cost savings are passed on by businesses. For example, in relation to the reduction in the 32 percent WST rate, wholesalers and retailers must reduce their prices from 29 July 1999.
| Stock on hand |
68. Retailers who have already paid the higher rate of WST on their stock on hand can claim a refund from the Australian Taxation Office for the difference between the new rate (22 percent) and the old rate (32 percent). Prices on existing stock, as well as new stock, should be reduced.
| No anticipation of tax increases prior to GST implementation |
69. The Commission expects that businesses generally will not adjust prices prior to the introduction of the GST solely on the basis of expectations about its introduction.
70. This general rule may, however, need to be qualified in some special cases during the transition period. For example, where insurance policies, club memberships and leasing arrangements that span the pre-GST and post-GST period are entered into after 2 December 1998, a premium or payment may need to reflect the GST liability to be incurred on the supply after 1 July 2000.
71. If businesses do incorporate an element of GST into their invoices in advance of the liability actually being incurred, they should ensure that the GST collected on a net present value basis is no more than required to be paid for the relevant period.
(c) Is the price for the supply unreasonably high even if the following other matters are also taken into account:
72. The legislation recognises that there may be other factors that influence prices in the transition period, in addition to the New Tax System changes alone. These may be indirectly related to the New Tax System changes, for example, changes in production and sales volumes resulting from price changes or anticipated price changes.
73. This criterion is regarded as having application if a price increase is greater than implied by a full dollar for dollar pass through of the tax related cost increase, or where a price decrease is not as great as the tax related cost decrease.
74.Without limiting the factors that may be taken into account, the following are examples of what are considered to fall within a supplier's costs:
| costs relating to inputs in a production process, such as
raw materials, capital equipment, wages and service inputs; and
| expenses of maintaining a place where goods are produced
or services rendered, such as rent, electricity and telephone
charges. 3
| |
(ii) Supply and demand conditions
75.As the Commission's focus will be primarily on changes in prices as a result of the New Tax System changes, not on the level of prices, it will be changes in supply and demand conditions that will be most relevant to its assessment of prices.
76.Changes in demand may result in margin changes. If margins are observed to change prior to the introduction of the GST in response to forward buying (or deferred buying) by consumers within the transition period, the Commission will closely examine subsequent pricing responses at the time of the GST introduction and afterwards. The Commission would expect to see the effects of demand anticipation on margins to be neutral over the transition period.4
(iii) Any other relevant matter
77.The Commission will consider any exceptional circumstance that may result in a business being unable to pass through the effects of the tax changes in a manner consistent with these Guidelines. An example of such circumstances may be that the business is operating in an industry that is subject to price regulation and is unable to adjust prices to reflect the impact of the GST.
78.In considering any other relevant matter the Commission will provide an opportunity for the business to present any pertinent information it considers will persuade the Commission that the price is not in breach of section 75AU.
| The Competitive market test |
79.In considering the relevance of other matters to changes in margins which occur in conjunction with the New Tax System changes the Commission may have regard to a competitive market test.
80.The Commission will consider, for example, whether any change in margin claimed to be justified by supply and demand conditions or by supplier costs is consistent with what would be expected to occur in a competitive market. For instance, in a competitive market while margins may increase in response to a demand surge, they could be expected to fall when demand declined.
81.Many businesses in Australia are developing pricing strategies to deal with the New Tax System changes- looking at the way they operate and seeing how they can compete effectively while meeting their legal obligations.
82.Businesses should take care in making any representations about the impact of tax changes on prices or the existence of tax related obligations in pricing claims.
83.The Trade Practices Act places clear obligations on businesses that pricing claims not be misleading or deceptive. These provisions are also repeated in the Australian Securities and Insurance Commission Act with respect to financial services pricing claims. States and Territories also have mirror provisions in their Fair Trading Acts. The Commission will liaise with other bodies to ensure consistency of action and, in some cases, may be delegated powers by those bodies.
84.Some examples of the types of representations that may be misleading or deceptive include:
| claiming or implying that
a consumer is required to pay an amount for GST- when this obligation
does not take effect until 1 July 2000;
| claiming that the business
is required to increase its price - and asserting that the increase
in price is because it is collecting a tax and has an obligation
to collect it, when there is no such obligation;
| encouraging consumers
to make buying decisions now to, for example, ‘beat the
GST' when prices may reduce, rather than increase as a result
of the New tax System;
| raising prices and claiming
that the increase is due to an anticipation of the effect
of tax changes where there is no reasonable basis for the claim;
and
| offering to provide a
service on the New Tax System changes that may misrepresent the
basis of the offer or infer a requirement or a regulatory requirement
to use that service.
| |
GST INCLUSIVE PRICE
85.When prices are displayed, they should be GST inclusive. In other words, the GST component in the selling price is not to be added after the sale, for example, at the cash register. This is consistent with the intent of the Government.
86.In exceptional circumstances during the transition period, it may not be possible for some businesses to comply strictly with the price display guideline. Businesses must take care to ensure that a purchaser has full information about the price of a good or service. Section 52 of the Trade Practices Act 1974 prohibits misleading or deceptive conduct, and section 53C requires the cash price to be stated in certain circumstances. The Commission will take action against those who contravene these provisions in respect of the New Tax System changes.
87.Businesses are encouraged to, but not required to, explain the basis of their price adjustments arising from the New Tax System changes to their customers.
88.The Commission expects that businesses will comply with the requirement to display GST inclusive prices.
89.However, there may be rare circumstances in which it may not be possible to reprice all stock on hand as at 30 June 2000 to take account of the New Tax System changes. In these circumstances, the ACCC would expect prominent notices to be displayed to advise consumers where the displayed prices do not include an adjustment for GST liability and a saving of WST. These notices should state that prices payable on those particular goods will be calculated at the time of purchase. The Commission would expect that display prices will be GST inclusive as soon as possible, and not later that one week after the GST commenced to apply.
90.Sections 75AW and 75AX enable the Commission to issue Notices in connection with price exploitation. The Notice under section 75AW will be prima facie evidence that price exploitation has occurred. The Notice under section 75AX will aid the prevention of price exploitation by specifying a maximum price.
91.Other than in exceptional circumstances, it is the Commission's intention that a section 75AW Notice will not be issued without prior contact with a potential recipient of such a Notice. Generally, businesses will be provided with the opportunity to justify that the price charged for a particular good or service is not a contravention of the law before the Commission undertakes court enforcement action or issues a notice under section 75AX.
92.The Commission proposes to deliver information programs aimed at promoting both business and consumer awareness of the price exploitation provisions of the New Tax System changes. Programs focussing specifically on the GST will commence in the latter half of 1999.
93.The Commission will be seeking public commitments from Australia's largest companies (turnovers in excess of $100 million) of acceptance of the Guidelines. These commitments will not be enforceable at law, but will be an important assurance to the public that price exploitation will not occur. The Commission will maintain a public register of businesses who make these commitments.
94.The Commission will require appropriate information to assess compliance with the Guidelines. Acceptable arrangements concerning the type and format of information required by the Commission will be negotiated in support of the public commitments. These arrangements could provide greater certainty for businesses as to the basis on which the Commission will review their prices.
95.The Commission encourages businesses to develop effective programs to ensure full compliance with these Guidelines, including appropriate advice to staff and monitoring of performance.
96.Public commitments and voluntary compliance programs will not take the place of enforcement action if circumstances warrant the exercise of that option. However, it is the Commission's experience that where a company adopts effective compliance strategies there is a reduced the risk of legal action.
97.The Commission expects that businesses will be able to justify in specific terms any change in prices resulting from the New Tax System changes. Justification should be by reference to the terms of the statutory test and these Guidelines, including consistency with competitive market operation.
98.It would be prudent for businesses to retain records of the basis on which pricing decisions were made during the transition period and how these decisions were impacted by the New Tax System changes.
99.The ACCC may monitor prices for either or both of two purposes:
| assess the general effect of the Government's New Tax System
changes on prices; and/or
| assist in its consideration of whether the prohibition on
price exploitation has been, is being or may in the future be
contravened.
| |
100.The Commission may require corporations or persons to give information or produce specified documents it considers may be useful in monitoring prices or that may be used in determining whether subsection 75AU(1) has been contravened. Penalties exist for failing to comply with a notice to give information or produce specified documents. This power is in addition to the ACCC's existing powers under section 155 of the Act which will apply in relation to suspected contraventions of the prohibition on price exploitation.
101.As part of its price monitoring role, the ACCC will be collecting prices for a range of goods and services in the market place. It will also take into account any available econometric modelling and may commission its own modelling work in monitoring prices and price movements.
National telephone hotline
102.The Commission has established a national telephone Hotline to enable consumer queries to be dealt with as expeditiously as possible. The number of the Hotline is 1300 302 502.
103.The Commission will provide information and guidance on its Internet website for the benefit of businesses and consumers. The address is: www.accc.gov.au
104.To enable businesses to achieve compliance with its Guidelines, the ACCC may issue information bulletins where necessary to deal with specific issues as they arise.
105.The ACCC has offices in each Australian State and Territory, as well as Tamworth (NSW) and Townsville (Qld). In addition to existing staffing levels, additional resources will be provided for each State Office of the Commission to assist in dealing with GST inquiries.
Appendix A:
Section 75AT of the Trade Practices Act 1974 defines ‘supply' as:
Section 75AT of the Trade Practices Act 1974 defines 'regulated supply' as:
- occurs during the New Tax System transition period and before the GST implementation date; and
- is of goods of a kind that, immediately before the commencement of the GST Transition Act, were specified in any of items 4 to 14 of Schedule 5 to the Sales Tax (Exemptions and Classifications) Act 1992; or
A New Tax System (Goods and Services Tax) Act 1999 states as follows:
Note: Except for a non-profit organisation, the registration threshold is $50,000 or such higher amount as the regulations specify. In the case of non-profit organisations, the registration threshold is $100,000 or such higher amount as the regulations specify.
ACT (national office)
470 Northbourne Avenue
DICKSON ACT 2602
PO Box 1199
DICKSON ACT 2602
Tel: (02) 6243 1111
Fax: (02) 6243 1199
Queensland
10th Floor, AAMI Building
500 Queen Street
BRISBANE QLD 4000
PO Box 10048
Adelaide Street Post Office
BRISBANE QLD 4000
Tel: (07) 3835 4666
Fax: (07) 3832 0372
Townsville
Level 6
Commonwealth Bank Building
Flinders Mall
TOWNSVILLE QLD 4810
PO Box 2016
TOWNSVILLE QLD 4810
Tel: (07) 4771 2712
Fax: (07) 4721 1538
New South Wales
Level 5, Skygardens
77 Castlereagh Street
SYDNEY NSW 2000
GPO Box 3648
SYDNEY NSW 2001
Tel: (02) 9230 9133
Fax: (02) 9223 1092
Tamworth
39 Kable Avenue
TAMWORTH NSW 2340
PO Box 2071
Tamworth NSW 2340
Tel: (02) 6761 2000
Fax: (02) 6761 2445
Victoria
Level 35, The Tower
360 Elizabeth Street
MELBOURNE VIC 3000
GPO Box 520J
MELBOURNE VIC 3001
Tel: (03) 9290 1800
Fax: (03) 9663 3699
South Australia
1st Floor, ANZ House
13 Grenfell Street
ADELAIDE SA 5000
GPO Box 922
ADELAIDE SA 5001
Tel: (08) 8205 4242
Fax: (08) 8410 4155
Perth
Level 3, East Point Plaza
233 Adelaide Terrace
PERTH WA 6000
PO Box 6381
EAST PERTH WA 6892
Tel: (08) 9325 3622
Fax: (08) 9325 5976
Hobart
3rd Floor
86 Collins Street
HOBART TAS 7000
PO Box 1210
HOBART TAS 7001
Tel: (03) 6234 5155
Fax: (03) 6234 7796
Northern Territory
Level 8
National Mutual Centre
9–11 Cavenagh St
DARWIN NT 0800
GPO Box 3056
DARWIN NT 0801
Tel: (08) 8943 1499
Fax: (08) 8943 1455
1. The Hon. Peter Costello, M.P., Treasurer, Tax Reform: not a new tax, a new tax system, August 1998.
2. Whilst the maintenance of net dollar margin, when related to a reduced cost of goods or services, translates to an increased net percentage margin for the supplier, no price exploitation will have occurred under the legislation because the reduction in price will still have reflected a full dollar for dollar "pass through" of the New Tax System changes.
3. Explanatory Memorandum A New tax System (Trade Practices Amendment) Bill 1998 Item 5, Paragraph 11.
4. Explanatory Memorandum A New Tax System (Trade Practices Amendment) Bill 1998 Item 5 Paragraph 12 states that it is intended that supply and demand conditions be examined not only in the market in which the good or service is supplied (where they are likely to directly affect the price), but also in related markets, such as markets for factor inputs (where they may indirectly affect the price at which a good or service is supplied).