The Laws of Unintended Consequences

[Jerry_Atrick]

Jim Chalmers must be feeling its effects today. The "abolition" of credit card surcharges to make the coffee cheaper according to Albo resulted in the ATO scrapping taking credit card payments for tax. I am not sure, but I thought the treasurer would have been consulted before the ATO decided to scrap the ability to pay with a credit card, especially if so many small businesses rely on it - which is in itself a worrying sign. 

 

I am trying to work out if this is really unintended consequences or just incompetence. 

 

Here is my conspiracy theory. When a consumer is presented a bill at the counter, and they will be slugged a fee for using the credit card, unless they are broke or tempo short of cash on their debit card (assuming they are not going to cop a bigger charge on their debit card use), then they are likely not to use that credit card. That causes a bit of a headache to the credit card companies as that is less lending they are dolling out and less transaction surcharges they are making. So, maybe lobbying the government (and i have no evidence of this), they managed to persuade the government that not allowing credit card surcharges was in the consumer interest. Or maybe consumer groups took the kool-aid and suggested the same to the government - with good intentions. 

 

What people forget is that, especially for small businesses - these charges can be 3% + a minimum transaction fee. For small items like a coffee, that can be a bit of change per transaction for the flat fee. 

 

But, if a business can't charge a surcharge, they are left with two options: 1. absorb it because all small business owners are greedy bar stewards and want to fleece the public, right?  Or two, just pass it on in increased prices - to everyone. But, that way, if you're tempted to use your credit card and avail yourself of the, is it 55 days interest free period, you will do it. The credit card companies still get some money and you're none the wiser. 

 

So, Albo spruiking the coffee being cheaper is not quite true and there were stories of before and after prices of the surcharge ban coming in was a biot of an own goal depending on where you purchased your coffee (and other things). 

 

Now, the ATO issue. I get that little issue of credit card surcharges on the tax payment may have slipped Chalmer's mind. I mean I am not sure he has had the experience of running a small business and the cash flow issues that come with that. I am not even sure he would have bothered to consult the ATO on the move because the ATO is about tax, and not credit card payments. But, surely, the ATO would have consulted Chalmers before making a unilateral decision to withdraw accepting credit cards if so many small businesses make their payments with credit cards. After all, the ATO just can't raise its prices.  In which case, maybe Chalmers forgot to ask how many make the payments and how much is paid using credit cards. I would guess that the ATO would have presented it as, "Gee, boss. If we can't make credit card payment surcharges and unilaterally increase the corporate tax rate, GST, or whatever taxes are paid this way, then we will lose $xbn to the credit card companies."  And everyone got fixated on the cost and not the impact. 

 

So rather than ask why that would be the case and what would be the impact of going ahead or not introducing a carve out for ATO payments (apart from that being political suicide), the ATO just went ahead - after all - they are a bit of a law unto themselves. 

 

Well, it has come to bite the government on the bum. In the scheme of things, not in a huge way, and it will all blow over - The problem is that the decision to allow credit card payments to be taken by the ATO will only be for a year.  What then? 

 

But, this is an example in poor thinking. The idea that the surcharge would be a boon for consumers is a joke. Ye, only 17& of cafes in this case have unilaterally increased their prices - you can bet others will follow suit. Also, you don't, as a consumer get to take advantage of a lower price by not using cheaper forms of payment. How is that a boon for consumers? Yes, you coul argue it punishes those who are skint at the time.. Er.. if you;re skint, shouldn't you be paring back a bit anyway - using a credit card will just make you skinter. 

 

And you have just cut off an important cash flow management capability for small businesses. Well done. 

 

I used to have a small software reseller in Aus.. I can't recall if it was Westpac or Anz that provided the merchant facilities to take credit cards, but I recall in the contract, I couldn't apply surcharges (well it was worded I couldn't offer discounts to those not using a credit card that wasn't available to those who used credit cards, if I recall correctly). The transaction costs sometimes made a sale unprofitable when competing with the big fellas. I managed to eek out a living from it, but jeepers it was tough. And that was offering support to try and bring in some margin against the big fellas. Almost every consumer is cost conscious - one learns that very quickly despite what the text books say.

 

I put these sorts of government decisions more to incompetence than to unintended consequences - but the latter is usually the result of the former. 

[facthunter]

You expect him to Mind -read do you?. I don't think the ATO have a big regular to and fro. with gov't. They are generally Independent in how they run their show.  They assess and collect what is Legislated by Gov't The way "SOME" Business's want to do it Passes the cost onto Other taxpayers.  Credit Cards are Contentious items The TAX office doesn't need the surety of Payment that Helps business feel good. But Be assured, The TAX office will GET their Money. Jim Chalmers is a "Doctor"of something so He's not your ordinary Dill as you Might Infer . We are STILL AAA rated and doing a lot better than most similar Countries. Check it up IF you don't believe me.  A business not being able to Pass on a gov't cost is BS. We pass on GST in full. . If you don't use a card you should get a price above those who do.  You should not have to pay for something you didn't use. That should be a basic principle. Nev

Edited 2 hours ago by facthunter

[old man emu]

1 hour ago, Jerry_Atrick said:

Albo spruiking the coffee being cheaper is not quite true and there were stories of before and after prices of the surcharge ban coming in was a biot of an own goal depending on where you purchased your coffee (and other things). 

 

Sounds a bit of a re-run of Hewson and the birthday cake.

[willedoo]

1 hour ago, Jerry_Atrick said:

I put these sorts of government decisions more to incompetence than to unintended consequences - but the latter is usually the result of the former. 

Jerry, it could be due to decisions being made in a more rushed manner than they normally would. The government is under political pressure and taking into account their so far very cautious nature, they have a need at the moment to be seen to be doing something. Regardless of whether that's distractions, announcables, policy making on the run or good policy, there's space they need to fill as time to the election is whittling down.

 

Another backdown today was their only very recently announced 25% cut to state disaster funding. That idea only lasted days after a huge backlash from councils in my state, which has the highest disaster cost in the nation. It would have been a nightmare for councils trying to fund that extra amount and also a lot of pressure on the state budget. It's rare for me to ever say anything good about this government, but credit to them where it's due for coming to their senses, listening to the stakeholders and reversing a bad decision. The ABC radio news today seemed to be dominated by the two backdowns, but the disaster funding issue is solved now so that's one less prickle in the government's undies.

 

With 18 months to the election and their polling numbers where they are, we can probably expect a few more bad ideas from them, but the test will be whether they can swallow their pride, correct their mistakes and move on.  

[old man emu]

If a business needs to pay the ATO money, probably from its BAS, what does it matter if the money is paid by digital transfer directly from a bank account; a transfer of moeny from a debit card, or the use of a credit card.? The ATO had got its pound of flesh.

 

Am I correct in thnking that if money was paid by a business using a credit card, then any interest charged by the credit card operator would be a legitimate tax deduction for the credit card holder? Would that be why the ATO doesn't want businesses paying by credit card??????