GST bytes PC market

As of today, there are over 1425 amendments before the Parliament on the GST. This sets the parameters for this column and the immense changes the PC industry must deal with now.

On the back of Y2K - which is expected to cost industry $12 billion - the price of compliance with the GST will surpass this by at least $3 billion dollars, totalling a massive $15 billion dollars. With just over five months to go until the implementation of the GST, I believe there are serious problems for small businesses to be compliant by 30 June. Only 28 per cent of all small businesses have a PC, and the GST is not fully legislated.

Even the Australian Tax Office (ATO) admits its GST roadshows are not gaining the confidence of the business sector. It has, however, announced a new initiative. Personalised information and support is being offered to small businesses around Australia, with GST field officers making visits to help them prepare for the new tax system.

At the time of writing, Tax Commissioner Michael Carmody said up to 240 GST field officers were available for visits, and there would be a total of 3000 officers by April.

IDC Australia has conducted PC channel research (respondents including PC resellers and distributors), in which 64 per cent say they will begin to address GST in the second quarter of this year. Another 18 per cent of respondents say they will start GST preparation in June 2000. This shows a clear warning that PC manufacturers, vendors, distributors and resellers have little understanding of the impact of GST on their own business and the impact on the overall PC market. The attitude of "she will be right mate" does not hold for GST.

GST is a multi-stage tax and must be viewed in conjunction with the sweeping changes to the total tax system including personal tax cuts, capital gains revamp, company tax and dividend imputation, small business reform, and finally tax shelters unroofed. These factors add new layers of complexity to all businesses and their infrastructures. All of the tax changes affect you and me. Australia will start the second millennium with a new tax system that is arguably one of the most radical packages of reform to be introduced in one broad hit.

I have closely followed the automotive industry and see some very interesting parallels for the PC market. The PC market is bracing for a long, tough haul. Vendors, distributors, resellers and retailers must plan their tactics now. I expect from a hardware point of view that the price of desktop PCs may fall by 6 per cent after 1 July, and total PC bundles (software, support and services, training, Internet access, and so on) may increase overall.

I strongly believe a significant increase in small business purchasing will spur the second quarter (April-June), which is historically the largest quarter for PC shipments. Why? One day makes the difference - 30 June 2000 or 1 July 2000.

In short, come GST time expect to see:

Hardware price decreases to swamp the impact of the GST on resellers;Massive discounting and incentive programs to emerge to eclipse sales in the changeover quarter;Businesses to take up tax deduction in the current financial period (that is, 1 July 1999 to 30 June 2000) matching expenses with revenue;Small businesses will buy the CPU only (no monitor) or may opt for hardware upgrades only (adding RAM or hard disk drives);Small business may purchase packaged software before 1 July.

Bernie Esner watches the Australian PC market closely as a senior consultant for market research firm IDC Australia.

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Bernie Esner

PC World
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