Page 1020 - Week 04 - Wednesday, 20 April 1994
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Commonwealth Government department - an amount which had been outstanding for over three months. Of course, if this woman paid her income tax a day late, she would be liable for a penalty tax of around 20 per cent. The same rule does not apply to her. In other words, she could not levy the Government with penalty interest.
In some areas around the country the picture is not very good. The Cain Victorian Government, for example, was severely embarrassed in September 1985 when a small business filing for bankruptcy revealed that it was owed $100,000 by the Victorian Government. By mid-1985, after the Victorian Government had investigated how many creditors were affected by similar problems, it was revealed that there were over 200 accounts outstanding for more than four months just from the Lands Department.
Let us look, Madam Speaker, at the application of this sort of legislation. The Bill I have introduced today is modelled on an Act called the Prompt Payments Act, which was a law invoked by President Ronald Reagan in 1982 and approved by the United States Congress. Prior to its introduction, the US Office of Management and Budget reported that up to 30 per cent of government accounts were being paid late. Following its enactment in 1983, that same agency reported an improvement to 99 per cent of accounts being paid on time. The US law is based on three premises, and they are the same premises that cover this Bill. First, it would result in timely payment of accounts by government; second, it would result in better business relationships with suppliers; and, third, it would improve competitive tendering for government business. A business which is forced to wait for long periods of time for payments is forced necessarily to pass on higher prices to its consumers, one of which of course is the Government. Any legislation which implements better business practices by government and leads to cheaper prices paid by government and the consumer must be a welcome step. The effect of the US law is very simple: Bills should be paid on time, and failure to do so attracts a penalty interest rate. There is no need for court action to obtain that penalty interest rate. It is, in effect, written into the contract by operation of the law.
The danger caused to our local economy by late payment of government accounts becomes evident when you talk to some of the small businesses which are affected by late payments. One small business owner who contacted me following my announcement to proceed with this legislation said that he was owed several hundred dollars by the ACT Government for some fairly simple work he had completed as part of his trade. The effect of the slow payment - eventually the amount was paid after some four months - was that he was forced to pay a number of his own accounts considerably later than he would otherwise have wished to. His own suppliers did not have a great deal of sympathy when he told them that he was awaiting payment from his own creditors. For someone who maintained that he always had a good credit record with his suppliers, the incident was acutely embarrassing.
Canberra is in a unique position in this respect. Many of our small businesses rely to some extent on government business for part of their turnover. Those who do not are certainly down the chain, relying on other people who rely on government, and so on. As governments play a larger part in the Canberra market and as our Government participates in that market share, it is entirely appropriate that we seek to impose a requirement which is basically the same as that which government imposes on its own customers.
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