University of New South Wales Law Journal
A quick glance at Australia’s newspapers over recent years would leave the unmistakable impression that tax is the main issue of the day. While two tax academics might find such attention appealing in students, there is little to commend this pre-occupation on a national scale; Australia surely confronts more urgent and compelling issues. The media attention means that tax changes generate an enormous amount of rhetoric on either side. Our topic is the exaggerated claims and half truths that proponents and opponents seem compelled to advance in order to justify their own positions and denigrate those of others. These claims take on the status of myths after endless repetition. We take the recent adoption of the Goods and Services Tax (“GST”) as an example. Our myths undoubtedly contain an element of truth; that is the case with all myths. But it is the inability to have a serious public debate about tax reform which concerns us here. The myths we have chosen here emanate from the supporters of the GST. We could have done the same for the myths on the other side – for example, the GST is a tax on the poor.
The proposition that GST is a tax on consumers, not on business, is asserted as a universal truth by economists and politicians. Putting it in its best light, this is a sophisticated statement showing an understanding of the difference between the formal and effective incidence of a tax. In theory at least, GST should end up being paid by Australian households, rather than the Australian firms on which it is formally imposed. But theory is a myth in many instances, and there will be many cases in reality where the GST will be a cost to Australian business.
Who will bear the GST will depend upon how much of the tax can be shifted forward by the firms who must pay it. Which in turn will depend on any structural impediments to price increases and the elasticities in the various markets for a firm’s outputs. If, because of institutional structures or market conditions, a firm cannot raise its price by the amount needed to recover the GST, the burden of the tax will have to be absorbed by the firm, in the form of a reduction lower gross revenue and reduced profits. In other words, the tax will, in the short run at least, be borne by the firm. This section will look at three instances where the GST will likely be borne by the firm, at least in part, and not fully by the consumer.
This first case is during the transition to the GST.The transitional rules start from the proposition that any supply made after 1 July 2000 will be subject to GST. This rule would make GST apply, for example, to supplies under a contract made long before the GST was resuscitated if some part of it was to be performed after 1 July 2000. It would even apply to a contract where all of the price had already been paid by the buyer. In order to deal with these kinds of problems, various complex transitional rules are provided which seek to protect the position of the supplier in such a case without generally increasing the price of the supply. For the ill-informed or uninquisitive, these transitional rules will clearly create a problem the seller will find to its amazement that some of the revenue (whenever) collected under a contract made well before 1 July 2000 is now forfeit as GST.
There is another structural aspect of the transition process which will likely lead to the GST being a real cost to business. It arises from the government’s endeavours to limit any price rises due to the GST, to limit the political fall-out it will suffer from the introduction of the GST. The government has charged the Australian Consumer and Competition Commission (“ACCC”) with the administration of provisions prescribing fines for an offence of “price exploitation in relation to the New Tax System changes.” Two issues have so far been identified about how those rules will operate, arising from the government’s vociferous insistence that it will not allow the price of any item to increase by more than 10 per cent of the pre-GST price. This insistence has created problems for example where suppliers want to round the price to the nearest whole number multiple or to the nearest “price point” for consumer products. For example, a consumer commodity with no implicit whole sales tax (“WST”) which sells for $2.95 pre-GST cannot realistically be sold for $3.24
after the GST; it will have to be priced at either $3.20 or $3.25 and the government has insisted that it cannot be sold at $3.25. Indeed as firms seem strongly to prefer to price at 95 or 99 (whether dollars or cents), they will have to bear virtually all the GST impact if they wish to keep this pricing structure.
Similarly, the government has tried to restrict the extent to which and the period over which the new (and increased) compliance costs of the GST can be passed on to consumers. The government’s own political agenda evidenced in the size of the potential fines and the strength of its pronouncements will have the desired in terrorem effect upon many businesses forcing them to absorb much of the GST, at least until the “New Tax System transition period” expires on 1 July 2002.
There will likely be more enduring instances where the incidence of the tax cannot be shifted forward to consumers. Market conditions will simply not permit it. To see how this might come about, consider a resident firm that currently sells its product for $30 and at this price makes a profit of $20 per unit. After the introduction of the GST, the firm’s costs for purchases will change they may increase or decrease depending on their character for GST purposes and how much embedded WST is involved. The firm will also have to add GST to its own price. If we assume that the firm’s costs remain unchanged after recovery of the GST input credit, if the firm is to make $20 profit per unit, it will need to sell its own output at a price of $33. If there is high elasticity of demand for its output, e.g. if there is a close tax free substitute from a foreign supplier via the internet, this price increase may reduce the volume of sales and the profitability of the firm. There is also likely to be a high elasticity of demand for many “luxury” products. If the local firm cannot sustain any increase in the price of its product, it will still have to continue to sell its output at $30 (GST inclusive) and bear the GST itself. Economists will typically distinguish between short-run and long-run outcomes and will dismiss the example just described is a typical short run story. Of course, for the firm involved, the short run consequence means either the end of its business or else a substantial diminution of its profits.
The third example of the GST as an ongoing cost to business arises from a much more systemic and ongoing matter that is, the audit activity undertaken by the Australian Taxation Office (“ATO”). A GST audit undertaken by the ATO will look for a series of errors: mis-characterisation of supplies or acquisitions, misallocation of GST or input tax credits to periods of time, inadequate record-keeping and so on. Consider the position of a firm which has classified a supply as GST-free, and has thus sold the commodity for $100. It is now told that in the ATO’s view, the supply is a taxable supply. If the ATO is correct, or the taxpayer decides not to resist the claim, the seller has now lost $9.09
in GST. It may or may not be able to recover this amount from the buyer of its product, depending first on the practical question, is the identity of the buyer known or unknown to the seller? If the practical hurdle can be overcome, the next question is whether the terms of the contract permit the price to be adjusted. The fact that the firm did not explicitly “charge” GST to the buyer is not relevant.
It might be thought that the answer to this dilemma is simply for the buyer to agree to pay more for the unexpected GST and to reclaim the amount immediately as an input tax credit. But that is unlikely to occur. Once the buyer discovers that the seller has been audited it will become entitled to an input tax credit of the amount of GST assessed, and it will be entitled to a windfall input credit of 1/11th of the amount it already paid. Every dollar collected by audit attests to the operation of the GST as a tax on business profits.
It is common to claim that the GST will help overcome tax evasion and the underground economy. A moment’s thought will make it clear that the GST is potentially more prone, not less, to evasion than a WST. The WST involves only one cash flow of tax, and this cash flow is deferred until a single transaction occurs. Thus the usual form of evasion under the WST is that the seller of goods will charge the tax to the buyer (or, where no tax is charged, simply leave the price at the tax-inclusive price) and not remit the tax (or the tax-equivalent amount) to the government. The GST on the other hand, involves two cash flows – the refund of input tax credits, as well as the charging of tax on sales. This makes GST vulnerable to a further kind of evasion – the claiming of input credits for tax on fictitious acquisitions. And, again unlike the limited population of WST taxpayers, the GST puts this temptation in the face of every GST registered commercial firm and for every transaction they undertake (or do not undertake).
Where the tax credits in a tax period exceed the GST on the taxable supply of goods and services in that period by a registered person, the excess tax credits give rise to a refund, and one which must be paid by the ATO within 14 days of the taxpayer submitting its return. This refund system is particularly important in the case of capital goods if the integrity of the GST as a consumption tax is to be maintained, but equally, it is one of the major weak points from an administrative viewpoint. It assists fraudulent claims that are only detected after the horse, in the form of the refund, has bolted. New Zealand is said to have suffered in this way at the hands of a number of UK criminals in the early days of its GST.
On the other hand, a claim is often made for the superiority of the GST over single stage taxes like WST, because each business will be looking over the shoulder of every other business to ensure that they pay their GST, so that a purchaser from the business can get GST credits on its inputs (often referred to as the ‘self-enforcing nature’ of the GST). Again these assertions depend very much on the assumptions about pricing, and parties to transactions that underlie them.
A registered business will always prefer to purchase at the same price inclusive of GST from another registered business which charges GST and provides an invoice rather than from a business which does not charge GST and does not provide an invoice. It is possible in this case that the supplier may not charge GST but provide a fictitious invoice for GST as just noticed. But such behaviour will be difficult to sustain over a long period for ordinary sales, if regular audits of on-going businesses are in place as is intended in Australia. This is why such fraud is likely to arise around large one-off transactions such as purchase of large capital items, since a single fraudulent invoice can generate a large tax refund, and in the early stage of implementation of the GST before audit coverage is fully in place. In this case it is more likely, however, that no actual transaction at all occurs, but a fraudulent invoice for a non-existent sale is used to claim a refund.
If the GST evading supplier discounts the GST-inclusive market price by the amount of the GST, the registered business purchaser will generally be indifferent. So too the ATO may not be overly concerned as the tax lost on this purchase will be made up for on the next sale in the chain. If, however, the GST evader is supplying to a consumer and not to another registered business, the evaded tax is lost forever. If the evader uses few taxed inputs (as is common in the services sector), there is little incentive to register to recover input tax. Hence the GST is as prone to evasion in household services (cleaning, plumbing, electrical, repairs etc) as other taxes. It may also lead to evaders specialising in this area and not making supplies to registered businesses, or alternatively charging tax on supplies to registered businesses but not households and seeking to allocate all input tax to the supplies to businesses.
A related claim often heard in Australia in the context of introducing a GST and switching the overall tax burden on individuals from income tax to GST, is that income tax evaders get taxed under the GST. The main category in mind is again providers of household services, and it is assumed that they are evading income tax and GST on their services. The argument is that when the evaders purchase groceries and other personal consumption items, they pay GST – their income gets taxed on consuming instead of on earning it. This claim is built on the less than plausible pricing assumption that the tax evaders do not increase their prices on the introduction of the GST when all other service providers in the economy do. Services are presently not generally taxed, so the introduction of the GST will generally increase market prices for GST-taxed services by the amount of tax. If the evaders do increase their black market prices in line with the general increase of market prices (though continuing to discount them relative to market prices by part of the income tax evaded), their increased income will compensate them for the GST now charged on their consumption so that they are no worse off.
It may nonetheless occur that there is a significant dent made in the underground economy when the GST is introduced - but only indirectly because of the GST. To register for the GST it is necessary in practice to obtain an Australian Business Number (“ABN”), a business numbering system being introduced for several purposes. Another reform commencing at the same time as the GST is the Pay-As-You-Go tax collection system which replaces wage withholding, instalment tax payments and provisional tax. One reform made in the context of these changes to tax collection arrangements is that businesses will be required to withhold 48.5 per cent tax on payments to other businesses unless the person receiving the money quotes its ABN to the payer. The payer will then be in a position to report the ABN of persons to whom it has made payments which the ATO can match with the tax return of that person.
This measure is likely to reduce evasion in business to business transactions. However, it does not apply when a business is supplying to a consumer so that the sector of household services will still not be captured. It is very difficult to impose reporting or withholding obligations on households so that one main area of evasion will always be a problem. Even in the business sector whether the information generated by the ABN system will be effectively utilised still remains to be seen.
Another myth of the “self-policing” GST system is the view that GST cannot be avoided, or at least that there is no point in trying to avoid GST, because of the tax invoice system. The idea behind this myth is that the tax invoice created for GST purposes tracks the amount of GST paid on inputs and charged on sales, and by this device, any GST avoided at one point in the chain just becomes a lower input credit to the next firm.
Clearly for those who sell to consumers or input taxed firms, there is a point in trying to avoid the GST in some instances. Consider a firm which sells its output for $110 GST inclusive. It retains $100 after GST. If it is able to reclassify its outputs to make them GST free or even input taxed, it will be able to keep the entire $110, provided it is still able to sell the output at that price. But of course, it will only be able to sustain that price if the buyer cannot buy at a lower GST inclusive price elsewhere, and if the buyer cannot use an input tax credit. If the firm cannot sustain that price level, the firm may have to reduce its price to say $102, which still generates for it an additional $2 in after-tax revenue. Note however, that even though the firm is selling to consumers or input-taxed suppliers, it is now the consumers who will mostly benefit from the avoidance rather than the supplier they acquire at an after-GST cost of $102 rather than $110.
Now consider what happens if the firm is selling to another fully-taxed firm. Assume a wholesaler is currently selling a product for $110 (including $10 GST) to a retailer. The retailer re-sells to a consumer for $220 (including $20 GST). Both businesses have made $100 profit after GST; the total tax collected is $20; and it is all effectively collected at the retail sale. Now assume the wholesaler purchases a GST scheme from a promoter which will magically change the character of its supply so that the total GST component on its sale is reduced to $2. The wholesaler can now sell the product for $102, but the retailer can only claim $2 in input tax credit ‘because that is the amount of GST shown on the tax invoice.’ If the retailer still wants to make $100 profit from its sale after GST, it must still sell the product for $220. This is the story that is relied upon to explain how the mere fact of the GST “tax invoice” stops the benefits of GST avoidance before the retail level.
But there are interesting elements to the story that do not appear from this simple picture. The main question is, why does the retailer claim an input tax credit of only $2, rather than $9.27, being 1/11th of the price it paid? The answer given usually is, ‘because that is the amount of GST shown on the tax invoice.’ The implication is based on a fanciful belief that the GST works in reality by firms laboriously adding up the GST shown on tax invoices. That is not reality in a post-GST world. Instead, taxpayers simply apply a 1/11th fraction to the total amount of cash paid or received, rather than assiduously tracking the GST entry shown on individual documents.
Nor is there much in the legislative framework for the GST would which require either this type of tedious tracking of invoices, or which would limit the taxpayer to claim as credits only the amounts that such a tracking would disclose. The amount of GST shown on the tax invoice is irrelevant to the taxpayer’s entitlement. While it is true that the taxpayer must hold a tax invoice at the time of claiming its credit, there is nothing in that provision which ties the taxpayer’s credit to the amount shown on the invoice.
In other words, if we revert to the example given above, it is quite a plausible outcome that the supplier will remit only $2 as GST while the buyer will be claiming $9.27 as input tax credit. Of course, one taxpayer is wrong in their treatment of the transaction, but it is forlorn to hope that tax invoices will automatically make this discrepancy apparent, and prevent it from occurring.
A second question that the story leaves unanswered is, why can’t the retailer get a free-ride from the same scheme? If, for example, the scheme converts a supply from being mostly taxable food to being mostly GST-free food, this re-characterisation may also hold for the retailer. The consequence will be that the item can pass the item to the consumer for only $202 with the revenue being the only player worse off. In fact, that outcome may lead to interesting incentives with downstream firms taking the initiative to convince upstream firms about how to deal with them.
Finally, what possible implication could the rules on tax invoices have on schemes that do not depend on changes to the character of acquisitions or supplies? Consider for example, a scheme designed to secure quicker access to input credits or the delayed payment of GST. These games are common in the income tax and will have their counterpart in GST. Again, some appear to believe that the tax invoice will prevent these games the seller won’t trigger a tax invoice early just to give the buyer a quicker credit, because that will trigger its own GST liability. But this view is based on the misapprehension that a tax invoice is one type of “invoice.” It is not and certainly need not be for the purposes of the legislation. A tax invoice is simply a document that meets the statutory description. Indeed, it is quite likely that the most common form of tax invoice will in fact be a receipt such as a cash register docket, and businesses that sell for cash or COD will not suddenly start generating pieces of paper just to create an invoice.
GST is intended to function as a tax on domestic consumption. In international terms this objective is achieved by subjecting imports to GST and freeing exports from any GST already levied. Indeed, one of the principal reasons advanced by the government for the GST was making Australia more internationally competitive, specifically the GST impact on reducing the implicit WST in Australia’s exports of goods. Again the claims have been overblown. Changes to WST in the early 1990s had already removed some of this problem. Further the argument that export competitiveness of goods is thereby increased overlooks adjustments to the exchange rate, though some transitional competitive advantage probably accrues, perhaps for as long as five years.
Goods are only a part of the picture, however. In recent years trade in services has grown much faster than trade in goods both domestically and internationally. One of the virtues of the GST in the domestic context is that it is not confined to goods and brings services within the consumption tax base. Internationally services are much more of a problem. First, it is very difficult to define what is an import or export of services as compared to goods where the definition can be expressed in terms of physical movement. Secondly, there is usually no border control in respect of services, so that it is not possible to tie the international operation of the GST to the Customs Service in the same way of goods.
So far as collection of GST on the import of services is concerned, GST is levied through a device typically referred to as a reverse charge – that is, where a buyer charges GST on its acquisitions. Tax is only levied on the acquirer where services are imported by a person who is registered or required to be registered and would not be entitled to a full input credit on acquiring the item. Where services are imported by a registered person for the purpose of making taxable supplies, there is no need to levy tax on the import as the levy would simply give rise to an immediate tax credit. By not levying tax on the import, there is no tax credit to offset against tax on the supply of goods or services by the importer and the import of services is effectively taxed at that stage. This does not apply where the importer is an unregistered person so that imports of services by consumers escape tax. Traditionally this loophole has not been regarded with much concern but the growing capacity to import services over the internet means that it is becoming much more important.
On the export side, because of the myriad ways in which services can be exported, it has already been found that the legislative provisions do not go far enough and extensive amendments are currently before Parliament. Just as it is difficult to capture all exported services, it is also a problem to ensure that services do not get the benefit of GST-free treatment unintentionally.
The international supply of services is a rapidly expanding area where there will be inevitable difficulties in the application of the GST. It is likely that gaps and double taxation will occur as countries increasingly extend their consumption taxes into the services area and services become more predominant in international trade. Hence double tax treaties of the kind found in the income tax area may become necessary to deal with the problems. There is no sign of this trend yet apart from the negotiations in Europe arising from the abolition of internal borders. These do not form a basis for double tax treaties as they are for a different purpose, a free market, rather than removing double taxation or gaps in taxation.
Besides problems arising from different international rules for services, the GST will not operate only as a tax on domestic consumption and will lead to double taxation so far as foreign businesses incur expenses in Australia. For example, if a representative of a foreign firm comes to Australia to negotiate a contract with an Australian firm or to attend a business conference, the costs of accommodation etc while in Australia will be subject to GST which will not generally give rise to an input tax credit either in Australia or the country where the foreign firm operates. The UK has a refund mechanism to deal with this kind of problem but Australia so far does not.
Similarly there may be need for jurisdiction enforcing tax rules to the extent that advantage is taken of the zero rating of exports by shifting mobile transactions offshore. So called unfair tax competition (one jurisdiction using beneficial tax treatment to poach the income tax base of other countries on mobile activities) is currently receiving a lot of attention internationally, but similar problems can emerge in the GST. Already special rules will apply in the international area to prevent Australian financial institutions being put at a competitive disadvantage in international capital markets. These markets are GST-free markets just as they are income tax free markets and while this is a state that might be deplored, particularly as regards the income tax, it is not something that can be overcome without the kind of concerted international action which shows no sign of occurring. Thus, although the supply of financial services within Australia will be input taxed, an export of such services is GST-free and therefore free of Australian tax.
The tax competition problem is coming to be felt in a number of areas. The tourist industry has argued that tourism services provided to foreign tourists in Australia should be GST free as otherwise Australia will be at a competitive disadvantage with other tourist destinations that either do not have a GST or which provide GST-free treatment. The EU is exploring concerns that labour intensive industries are internationally disadvantaged by the VAT.
Exemptions, exclusions and special regimes are the bane of any tax administrator’s life. For taxpayers they can be both a difficulty to be managed, and an opportunity to be pursued. Consequently, it was always a clear intention of the designers of Australia’s GST that it would be as broadly-based as possible. It would even extend to food. The politics of the Senate defeated the administrator’s nirvana and the consumer’s nightmare.
This outcome led to our next myth that, were it not for food and the politics of food, the GST would have operated as a universal tax with no exemptions or special treatments. This is a poor reflection of GST reality. Instead, the removal of GST from food is just another of the many special regimes that every GST must accommodate. Every GST is replete with special regimes for merit goods, difficult to tax goods and services and to deal with special situations. Exempting food is neither unusual among GSTs, nor is it an overwhelmingly difficult exemption to administer. Every country with the exception of New Zealand manages to do it. It is certainly not as awkward as the many other special regimes that every GST must accommodate, special regimes which have passed almost entirely unremarked.
Just as is the case overseas, so also in Australia there are many other merit goods that have been thought sufficiently important to deserve GST-free treatment. It is invariably the case that health, educational, religious and charitable activities receive special treatment under a GST. To that list one could add books, children’s clothing and various subsidised government services (such as postal and telephone services, public transport, water and electricity). Australia has managed to avoid some but no means all of these boundaries and the issues they create, but they could never have been eliminated entirely.
And then there are special regimes needed for difficult to tax goods and services. Consider the treatment of financial services. No OECD country has been able to devise a way of taxing financial services successfully under an invoice-credit method GST. Israel attempted to impose a modified form of GST on financial services but abandoned the attempt after 3 years. Instead, most countries resort to the tried and tested method of imposing financial transaction taxes such as stamp taxes, insurance premium taxes capital taxes, or turnover taxes. The problems created by the input taxing of financial services are well known. Financial institutions will try to procure their inputs from other input taxed firms leading to pressure for more input taxed firms, they will in-house services that they used to procure from taxable suppliers, and they will procure offshore. While there are ways in which these practices might be impeded, the basic incentive always remains. And there is then the problem of apportionment of input credits, a difficulty which is unavoidable and perennially difficult for both firms and tax administrators to resolve. Australia was never likely to be able avoid the financial services boundary.
We will spare the reader any prolongation of the list of special regimes. The point is, we hope, by now self-evident that the GST could never have operated as a universal tax without special regimes for merit goods, difficult to tax goods and services, and to deal with special situations. Food is no more than another blemish on an already well-cratered surface.
We have not discussed these myths to trash the GST. We believe that the GST is the best tax for capturing as much of the consumption tax base as is feasible. But like most taxes, while the idea may be simple, its implementation is inevitably complex in the modern world. Rather our purpose is to suggest that tax reform is a serious business which deserves much better than we currently get from our media, politicians, and business and labour leaders in the way of public debate. Let's have more of the complex truths and less of the convenient myths. And let's not do it on the front pages of the media.
[*] Professor of Taxation Law, Melbourne University Law School, Consultant, Freehill Hollingdale & Page, Melbourne.
[**] Professor of Law, University of Sydney, Member of Australian Taxation Office GST Rulings Panel, Consultant, Greenwoods & Freehills.
 We assume some familiarity with the basic operation of the tax which we have discussed in detail in GS Cooper and RJ Vann, “Implementing the Goods and Services Tax”  SydLawRw 16; (1999) 21 Sydney Law Review 337. The technical basis for many of the statements in this article may also be found there.
 This position is taken in the Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998, pp 6-7, (“GST is effectively borne by consumers when they acquire anything to consume … Suppliers do not bear the GST because the tax is included in the price of what they supply”) and in the Treasurer’s statement, Australia, Treasury, Tax Reform: Not a New Tax, a New Tax System, August 1998 at 80 (“ANTS”) (“the tax being ultimately paid by the final consumer … sales by one business to another will be effectively tax-free”).
 The problem of ignorance is not always confined to small firms. There is, for example, a rumour about a prominent Australian insurance company which sent out supplementary premium notices during March and April 2000 to customers to collect small amounts for the GST on each of the insurance policies it had written covering risks occurring after 1 July 2000.
 ACCC, “Price Exploitation and the New Tax System General Principles, Information and Guidelines on When Prices Contravene Section 75AU of the Trade Practices Act 1974”, July 1999, revised March 2000.
 See for example, Minister for Financial Services and Regulation, “Hockey Directs ACCC on GST”, Media Release FSR/003, 15 January 2000.
 Senator Kemp, Senate, Hansard, 16 February 2000, p 11875. Professor A Fels, Transcript of interview, The Small Business Show, 20 February 2000; ACCC, “GST Claims Misleading”, Media Release, 15 February 2000.
 Trade Practice Act 1974 (Cth), s 75AT.
 The internet poses many challenges for the tax system including the GST, see ATO, Tax and the Internet (Second Report), 2000 at Part II, ch 7; Organisation for Economic Development and Co-operation (“OECD”), Committee on Fiscal Affairs, “Electronic Commerce: A Discussion Paper on Taxation Issues,” presented at the Ottawa Ministerial Conference, 10 October 1998, available at <www.oecd.org//daf/fa/e_com/discusse.pdf>.
 This point was made by JR Kesselman, “Role of the Tax Mix in Tax Reform” in JG Head (ed), Changing the Tax Mix (1986) at 70–71 during the previous tax reform but is consistently ignored in public debate on the GST.
 Taxation Administration Act 1953 (Cth), ss 12-190.
 See for example, M Fenton-Jones, “Watch out for these top 10 mistakes” Australian Financial Review, available at <afr.com.au/content/000427/gst/fineprint/gst6.html> (listing among the more common GST mistakes observed in New Zealand, “claiming GST input tax credits on items that do not carry GST such as payroll tax, fringe benefits tax or stamp duty; cash-basis registered businesses claiming GST input tax credits on cheques written which live 'in the top drawer' until funds exist to post them to the creditor; claiming GST input tax credits on the full amount of expenses which are subject to apportionment such as vehicle expenses, home office and entertainment; not holding a correct tax invoice for GST input tax credits claimed; claiming GST input tax credits on invoices from unregistered suppliers; claiming GST input tax credits on hire purchase payments rather than the cost of the underlying asset; claiming GST input tax credits on assets purchased but not paying GST on assets sold; cash-basis registered businesses claiming GST input tax credits on the full purchase value of an asset when only a deposit has been paid, such as real estate, creates problems; accruals-basis businesses claiming GST input tax credits on invoices held at the end of a tax period and again in the following period when the payment is made can come a cropper; the final mistake is paying GST on non-taxable receipts such as tax refunds, GST refunds and personal funds introduced into the business”). These errors all suggest that in practice, taxpayers simply apply a 1/11th fraction to the total amount of cash paid or received, rather than assiduously tracking the GST entry shown on individual documents.
 This is also the position in Europe. See Genius Holdings BV v Staatssecretaris van Financien  ECR 4227.
 There is another response to this question: the supplier may remit quarterly while the buyer claims its credits monthly.
 ANTS, note 2 supra at 72.
 DJ Juttner, “International Trade: Implications of VAT” (1997) 1 Tax Specialist 90.
 ANTS, note 2 supra at 71.
 OECD, Harmful Tax Competition: An Emerging Global Issue, (1998. See also note 8 supra.
 Tourism Council of Australia, Submission to Select Committee on a New Tax System, 1999 at section 5, available at <www.tourism.org.au/pr.html>.
 Proposal for a Council Directive … on Labour Intensive Industries, Official Journal, No C 102, 13 April 1999, available at <europa.eu.int/eur-lex/en/oj/1999/c_10219990413en.html>.
 ANTS, note 2 supra at 80.
 See AA Tait, Value Added Tax: Administrative and Policy Issues, IMF (1991) p 11.
 See OECD, Value Added Taxes in Central and Eastern European Countries: A Comparative Survey and Evaluation, OECD (1998) ch IV.
 See for example, Tait, note 21 supra, chs 3-4; K Messere, Tax Policy in OECD Countries: Choices and Conflicts, IBFD (1993) p 396 ff.
 See Tait, note 21 supra, p 93.
 See OECD, Consumption Tax Trends, OECD (1995) ch 5.
 Australia has however changed the incentives slightly with its reduced input tax credit which has led to a narrower definition of financial supply than in many other countries but makes the apportionment problem worse.
 The basic elements of the GST occupy about one quarter or less of the 400 pages of the legislation; the rest is given over to special, but necessary, regimes.