Fed: Insolvencies predicted to surge in face of tax changes

AAP General News (Australia)
12-05-1999
Fed: Insolvencies predicted to surge in face of tax changes

MELBOURNE, Dec 5 AAP - The new GST and pay-as-you-go tax system will create a surge
in businesses going broke next year, an accounting firm predicted today.

Melbourne-based Pitcher Partners, which deals mostly with businesses turning over between
$1 million and $20 million a year, said the increase in insolvencies could begin early
in the new year and peak in the second half of 2000.

"There will be general uncertainty arising from the unknown consumer reaction to the
introduction of the GST," the firm's managing partner, Tim Jonas, said in a statement.

"It is possible that consumers will withdraw their spending temporarily or change their
spending habits by, for example, spending available cash on new cars because of predicted
savings."

The new pay-as-you-go tax system, to be introduced on July 1, 2000, would also cause
problems for companies that had not planned ahead for a duplication of payments caused
when the old and new systems overlap.

Mr Jonas said he thought businesses in the over-heated building and construction industry
"where a number of small businesses have grown into big businesses with big commitments"

would be hardest hit.

"As these operators take advantage of the buoyant times, many are failing to keep an
eye on management and costing issues," he said.

"When the bubble bursts, the combination of cashflow problems and the demands of the
PAYG system could tip many businesses over the edge," Mr Jonas said.

AAP imc/rds/br

KEYWORD: TAX PITCHER

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