MEDIA RELEASE

---

ACS Concerned About Impact of Tax Reform on IT Industry

Friday 14 August 1998 - The Australian Computer Society (ACS) has questioned the overall benefit of the Howard Government’s proposed tax reform package for the IT&T industry, expressing particular concern about the negative effect that higher prices will have on both software and IT services. The Society is seeking urgent consultation with the Government to discuss the issues.

ACS President, Prins Ralston, said a 10 per cent tax could severely impact the industry, profession and the community, with price hikes leading to a reduction in demand for software, outsourcing and telecommunications services.

"With IT budgets already constrained by Y2K, we are unlikely to see a marked increase in funds available for IT expenditure, so many organisations will be forced to rationalise their spending, particularly with regard to IT services," he said.

"At a time when companies are trying to take advantage of technology to enhance productivity and improve their international competitiveness, this expenditure reduction would be self-defeating."

Mr Ralston also questioned measures which imposed a 10 per cent GST on outsourced IT services, while exempting internal services.

"This Government has detailed a vision for underpinning growth in Australia’s IT&T industry through outsourcing, and yet this package will clearly reward banks and government departments which reduce their dependence on outsourcing and take IT projects back in-house."

In terms of the community, the ACS is concerned that a rise in the cost of IT services and products, particularly for telecommunications, will discourage people from participating in the information superhighway, with those in outback Australia being most affected.

"While business will be able to claim the increased cost of telecommunications as a tax deduction, families and community members will not, even though they represent the mass market that is so critical to ensure the viability of this industry," he said.

The ACS has also questioned the timing of the proposed implementation, saying the IT skills required to address the Y2K and Euro challenges were already stretching available resources to capacity.

"Both Y2K and the Euro require substantial IT investments without any payback for the business and GST-related IT projects would fall into a similar category. Can businesses really afford to keep outlaying for administrative changes that don’t provide a return and still expect to remain competitive?" he asked.

"The period leading up to 2000 might not be the best time in which to address this need, given the existing challenges already facing the business community and the current shortage of skilled IT professionals.

"We must also ensure these projects don’t distract organisations from embracing the growing trend towards e-commerce, which offers a unique opportunity for Australia to compete in the global marketplace."

Mr Ralston said the ACS is disappointed that the Government completely failed to develop any measures aimed specifically at encouraging growth with the IT&T sector.

"The Prime Minister himself has stated that IT&T is critical to Australia’s future, but this package ignores its significance by avoiding any mention of the industry or technology issues," said Ralston.

The ACS is seeking an opportunity to consult with the Government to clarify many of these issues and discuss ways of resolving any differences, and plans to actively lobby Canberra on the tax reform issue.

This media release is located on the ACS Web site at www.acs.org.au/news/gst.htm

ENDS

Media Enquiries:

Prins Ralston, ACS President, Tel: (0411) 755 069, Email: p_ralston@ntu.edu.au

Caroline New, Caroline New PR, Tel: (02) 9980 8060 or (0411) 889 456, Email: cnew@acslink.net.au