Read The Times Australia

Daily Bulletin

Imposing GST on low-value imports doesn't level the playing field

  • Written by: Kathrin Bain, Lecturer, School of Taxation & Business Law, UNSW

The government wants to extend GST to imported online goods under A$1000, effective from 1 July 2017, with Treasurer Scott Morrison stating it will “establish a level playing field for our domestic retailers”. But the proposed legislation doesn’t do this. Rather, it unfairly imposes GST on goods purchased from overseas sellers, that wouldn’t be subject to GST if purchased from an Australian seller.

The government also hasn’t cleared up how the collection will be adequately enforced. Without appropriate enforcement, collecting more revenue from this tax seems unlikely.

Currently, low-value imports (those with a customs value of A$1,000 or less) are exempt from GST. If the legislation is passed, overseas vendors who sell more than A$75,000 of low-value goods to Australian consumers would be required to register for GST, and collect and remit GST on low-value goods to the ATO.

Those imports will continue to be stopped at the border with any GST, customs duty, and associated fees paid to Australian Border Force by the importer before the goods are released.

For sellers of low-value goods it will mean that an overseas supplier of both low and high value goods will be subject to two separate tax regimes. The requirement to collect GST will apply only to low-value goods.

Online marketplaces and mail forwarding services

The new law will also apply to online marketplaces such as eBay and “redeliverers” - businesses that forward goods to Australia from overseas companies. For goods purchased through an online marketplace, the marketplace rather than the seller will be treated as the supplier. Similarly, if low-value goods are delivered to Australia by a redeliverer, they will be considered to be the supplier for GST purposes.

While extending the GST to these goods is meant to level the playing field between overseas and Australian vendors, treating the online marketplace or mail forwarder as the supplier of goods is inconsistent with the treatment of domestic transactions.

As eBay has stated in their submission to the Senate Committee: “eBay is not a seller. eBay is a third-party online marketplace that simply connects buyers and sellers”.

For Australian vendors who sell items on eBay, it’s the individual seller who is responsible for collecting and remitting GST on products they sell (if they are required to be registered). A seller who uses eBay, but isn’t carrying on an enterprise or does not meet the A$75,000 turnover threshold, isn’t required to be registered and would not be required to collect GST on their sales.

However, the proposed legislation does not treat overseas vendors in this way, by treating online marketplaces and mail forwarding services as the supplier of goods. The Treasurer stated that:

Including online marketplaces ensures that only a limited number of entities need to collect the GST, rather than the multitude of small, individual vendors making supplies through these online marketplaces that compete with Australian retailers here in Australia.

With all due respect to Scott Morrison, he seems to have missed the point that small, individual vendors should not (if their turnover of low-value goods into Australia is less than A$75,000) be required to collect GST merely because they use an online marketplace.

EBay has gone as far as stating in their submission that: “Regrettably, the Government’s legislation may force eBay to prevent Australians from buying from foreign sellers”. This is because they would not be able to comply with the requirements imposed under the new legislation.

Compliance concerns

Despite the legislation being intended to come into effect on 1 July of this year, it is still unclear how the new system will be adequately enforced.

At the moment, information displayed on international mail declarations doesn’t indicate whether the overseas supplier is registered (or required to be registered) for GST. It also doesnt say whether GST has been collected, and whether it is being correctly remitted to the ATO. Even if this information was readily available, it’s not clear how the ATO would deal with non-compliant entities.

If it was determined that GST had not been charged and collected by the overseas supplier of the low-value goods, there is nothing in the proposed legislation that would allow the GST to be collected from the importer (instead of the supplier) when the goods enter Australia. However, attempting to enforce an Australian tax debt against a non-compliant overseas vendor would be a complex, costly, and likely fruitless endeavour.

Consumer advocate group Choice has expressed concern that the government would use powers under the Telecommunications Act to block the websites of non-compliant entities. However, Scott Morrison has indicated that the government has no intention of using this power.

Concerns regarding enforcement have been echoed in a number of submissions, including the Taxation Institute of Australia and Amazon. Both highlight the fact that lack of enforcement may simply encourage Australian consumers to purchase goods from non-compliant overseas entities that are not charging GST.

By treating online marketplaces and mail forwarding services as the supplier of goods, the proposed legislation does not treat overseas vendors in the same way as domestic vendors. The tax will only be effective if the system for collecting GST on imports can be adequately enforced. Without appropriate enforcement, high levels of compliance seems unlikely. A lack of compliance will continue to leave Australian retailers at a disadvantage, with only minimal increase in GST revenue.

Authors: Kathrin Bain, Lecturer, School of Taxation & Business Law, UNSW

Read more http://theconversation.com/imposing-gst-on-low-value-imports-doesnt-level-the-playing-field-76457

Business News

How Businesses Can Prepare for Unexpected Power Outages

Power failures can occur quickly. The supply may be interrupted by bad weather, issues with the electricity network, damaged equipment or local construction work. This can be just a hassle for a fam...

Daily Bulletin - avatar Daily Bulletin

How Chatswood Tutoring Can Fit Into a Student’s Weekly Routine

Create a Predictable Weekly Structure A consistent weekly routine can make study easier to manage when students are balancing several subjects. Chatswood tutoring can provide a fixed learning point a...

Daily Bulletin - avatar Daily Bulletin

The Rise of Digital Marketplaces in the Australian Trade Sector

For decades, the Australian trade and construction sector operated almost entirely on word-of-mouth recommendations and local community networks. Small business owners typically relied on local newspa...

Daily Bulletin - avatar Daily Bulletin

How Immigration Lawyers Can Help

Introduction Visa decisions can shape employment, family life, study plans, travel, and future residence. A small omission can lead to delay, added expense, or refusal. Immigration lawyers assess l...

Daily Bulletin - avatar Daily Bulletin

How Industrial Drying Equipment Supports Efficient Processing

Many industrial processes require moisture to be removed from compressed air, products or process materials before they move to the next stage. Excess moisture can affect equipment performance, produc...

Daily Bulletin - avatar Daily Bulletin

Practical Ways a Whiteboard Can Improve Workplace Communication

Effective communication helps teams stay organised, share ideas and keep track of important information. While digital tools are now common in many workplaces, a whiteboard continues to provide a simp...

Daily Bulletin - avatar Daily Bulletin

Designing Eco-Friendly Custom Water Bottles for Your Next Event

The Evolution of Sustainable Event Merchandise Event planning has undergone a massive transformation over the last decade. Gone are the days when organizers could hand out cheap, single use plastic...

Daily Bulletin - avatar Daily Bulletin

Why Choosing a Professional Florist Melbourne Makes Flower Delivery Impactful

Flowers have a great power to speak when humans cannot express their feelings with right words. Flowers are the best gifts when you are celebrating a birthday or welcoming a newborn child into your fa...

Daily Bulletin - avatar Daily Bulletin

The Business Case for Choosing Australian Fabricators Over Imported Alternatives

For a long time, you might have defaulted to overseas suppliers when sourcing fabricated metal components for a project. The unit price was lower on paper, and the maths seemed straightforward. That...

Daily Bulletin - avatar Daily Bulletin

The Daily Magazine

Transforming Your Backyard for a Sophisticated Milestone Celebration

Hosting a milestone event at home has become a deeply popular choice for Australians looking to cr...

Valentine's Day Gifts for Your Husband That He'll Actually Love

Valentine's Day tends to be built around flowers, chocolates and jewelry, which leaves a lot of wi...

Why European Vehicles Demand Specialised Maintenance on Australian Roads

European cars, encompassing premium brands like BMW, Audi, Mercedes, and Volkswagen, are highly soug...

How Melbourne Businesses Can Retain Top Talent Through Visa Sponsorship

Melbourne businesses are facing an increasingly complex hiring landscape. According to the Jobs and ...

Clever Ways to Combat Dampness and Maintain a Healthy Bathroom Environment

Australians currently spend more than 90 percent of their time indoors. This modern lifestyle heavil...

How Registering a Company in Singapore Can Support Business Growth

Choosing where to register a business can influence how easily it grows, attracts customers, and e...

What Business Owners Should Know About Company Registration in Hong Kong

Hong Kong is a popular location for entrepreneurs looking to establish businesses with internation...

What Entrepreneurs Should Know About the Benefits of Registering a Company in Australia

Starting a business involves more than finding customers and offering a good product or service.  ...

From Free-to-Air to Netflix: Where Australian Brands Are Spending Their TV Dollars Now

Not long ago, an ad break meant one thing in Australian homes: free-to-air television. Today it mi...