Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
Criticisms from Amazon, eBay, Etsy and Alibaba before an Australian congressional hearing has convinced key politicians to rethink a goods and services tax, making Senate passage unlikely.
If it were to pass, the bill would introduce an rare approach effective from July 1, requiring online marketplaces to collect and remit GST on low-value goods sold into Australia via their sites.
The same obligation would be directly imposed on overseas suppliers of low-value goods if they have Australian revenue of at least A$75,000 ($56,511), while eliminating the goods and services tax exemption for imported goods worth less than A$1,000.
Giving evidence before an April 21 public hearing for the Senate Economics Committee’s inquiry into the bill, Jooman Park, managing director and vice president for eBay in Australia and New Zealand, told politicians that “we are not sure if we can build tax collection capabilities.”
“If the legislation passes as is, while we have no tax collection capabilities, it will force marketplaces like eBay to prevent Australian buyers from purchasing from foreign sellers, because we do not want to violate the law,” Park said.
Commenting on the prospect of collecting GST from the many thousands of companies that use its platform, Amazon’s director of global trade services, Kevin Willis, said “there has never been a tax of this magnitude.”
The opposition Labor party and an influential minor party told Bloomberg BNA April 21 they are seriously concerned about the bill, following the Melbourne hearing.
“We think the process has been botched and there should be a one-year delay in order to get it right,” shadow assistant treasurer Andrew Leigh told Bloomberg BNA by phone.
The government had been “ham-fisted” in developing the proposal, he noted, describing the concerns raised by the online marketplaces at the hearing as “deeply concerning.”
Amazon.com Inc., Etsy, Alibaba Group Holding Ltd. and eBay Inc. had a common message at the hearing—that it would be extremely difficult for them to establish systems to collect GST on sales of low-value goods and that it would be better for freight and postal services to do it.
Park also had an eye to the potential global ripple effect of Australia introducing such an arrangement.
This could have a global impact, he told the hearing. “We have to assume all other governments, all other countries, will ask eBay to collect GST.”
“When you think about the vastness and the complexity of what this might take and the number of players that we are talking about, which grows daily, exponentially, as cross-border e-commerce and the attraction of the marketplace takes hold, including in Australia, it is difficult to quantify what the implementation costs are,” Willis said.
Timothy Dyce, Australian Taxation Office deputy commissioner of indirect tax, said the proposals are likely to affect about 3,000 organizations that are online marketplaces, large-scale sellers into Australia, or redelivery services.
Of these, about 38 percent are based in the UK, 27 percent are North American and about eight percent are in each of China and Hong Kong.
Dyce said options to deal with “extreme” cases where organizations refused to register despite repeated requests “involve potentially garnisheeing revenue flows or even assets.”
Organizations were also likely to be brought into line by the prospect of the tax authority in their home jurisdiction being advised by the ATO that the company is evading its GST responsibilities, he said.
“They don’t want their reputation in their own jurisdiction impacted by not complying in Australia,” he said.
The bill aims to axe an arrangement that currently exempts imports worth under A$1,000 from GST, with the aim of providing a level playing-field for domestic retailers to compete against foreign-based traders.
But the opposition Labor party said evidence at the Senate committee hearing into the bill had made it clear the government needed to reconsider it.
Without further detailed work by Treasury, involving economic modelling, it isn’t possible for Labor to be confident about which model to implement, Leigh said.
Senator Nick Xenophon, a wily political operator who leads a team of three senators, similarly told Bloomberg BNA, “I am concerned this will be a debacle.”
“It could end up having all sorts of unintended consequences,” he told Bloomberg BNA by phone.
The government was trying to deliver a level playing-field for all retailers but “it’s going to end up giving us a lot of scorched earth” if it doesn’t step back and get its approach right.
Neither Leigh nor Xenophon said the government should definitely ditch the approach of collecting via online marketplaces, but both said their concerns needed to be taken more seriously and alternatives examined more closely.
Without the support of Labor or the Nick Xenophon Team the government would need the support of the Greens and a diverse mix of micro-parties to pass the bill.
Treasury officials told the hearing that Sweden has already legislated a similar approach that will take effect in 2018, and Canada uses a similar model to collect GST on imported subscription magazines.
The ATO said that it could ensure reasonable levels of compliance with the proposed arrangement, adding that the administrative burden for online marketplaces and foreign companies would be light.
But neither Labor nor Nick Xenophon were buying the reassuring comments from Treasury and the ATO that the collection model would prove workable.
Noting evidence from KPMG that the Treasury seemed to be anticipating a compliance rate of under 30 percent for the measure, Leigh said “I’ve been working on tax policy for a long time.”
“It’s hard for me to think of another instance in which Treasury has thought that three out of four players wouldn’t comply with the tax.”
The Senate committee inquiry into the bill will release its report May 9.
To contact the reporter on this story: Murray Griffin in Melbourne at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)