Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
Online marketplaces—including eBay Inc., Etsy and Alibaba Group Holdings—are warning Australia’s government of risks to free trade and the possibility consumers could lose access to global online shopping if a tax bill set to eliminate the goods and services tax exemption for imported goods worth less than A$1,000 ($754) moves ahead.
In submissions to a Senate Economics Committee inquiry into the bill—which intend to level the playing field between Australian businesses and offshore suppliers—eBay in particular has threatened to prevent online customers accessing and purchasing products or services, known as geoblocking, over the tax bill.
The bill will be discussed at an April 21 public hearing of a Senate economics panel, with witnesses yet to be finalized.
The bill would require online marketplaces such as eBay, Amazon Inc., Etsy and Alibaba to register for, collect and remit GST on low-value goods that Australians buy from overseas using 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.
In a joint April 12 submission to the Senate committee ahead of the hearing, eBay, Etsy and Alibaba called for a different GST collection approach. Their favored “logistics model” would rely on Australia Post, express carriers and freight forwarders to collect and remit GST on low-value imports.
Amazon, meanwhile, has criticized the proposal for failing to achieve the objective of creating a fairer tax system, support local businesses and maximizing GST, while American business interests have warned of risks to free trade.
“Regrettably, the government’s legislation may force eBay to prevent Australians from buying from foreign sellers” via its platform. “This appears to be the most likely outcome at present,” eBay said in its committee submission.
The low-value goods bill was introduced to parliament in February after being signaled in the May 2016 federal budget, with the intention of ensuring low-value imports face equivalent GST treatment to goods purchased domestically.
In its current form, the low-value goods bill specifies that GST would be payable with effect from July 1, the same date a ‘Netflix tax’ law already passed will apply GST to international purchases of digital products.
According to eBay, the bill should either be withdrawn altogether, and efforts focused on an OECD-wide solution, or significant amendments will be required “to even contemplate” online marketplaces somehow collecting GST.
The eBay submission is backed by a Deloitte study on the economic benefits of digital platforms.
In its April 10 submission, Amazon said the bill “fails to achieve its stated policy objectives” which are to “create a fairer tax system, support Australian small businesses” and “create a level playing field for all businesses.
“The Bill imposes an administrative burden on sellers and electronic distribution platforms which will create an inherent disincentive for them to comply,” it added.
The company notes that it is estimated that there are approximately 1,100 foreign low value imported goods suppliers that would have to register for GST under the bill in any given week.
“The hybrid Vendor Model does not provide for efficient mechanisms to detect failure to register by these offshore suppliers, who operate in multiple overseas jurisdictions. In addition there are significant questions around enforceability. This will inevitably result in a large proportion of vendors either failing or choosing not to register, and large volumes of LVIGs entering Australia without being subject to GST,” Amazon states.
The American Chamber of Commerce in Australia describes the bill as “anti-free trade in nature” and says it might prompt some foreign businesses to reconsider trading in Australia.
Its submission describes the move to impose GST on low-value imported goods via online platforms as risking an international “race to the bottom” on taxing imports that would be “detrimental to the entire global trade regime.”
However, Melbourne-based GST-specialist partner in law firm MinterEllison, Bastian Gasser, said the proposals should not have been a surprise for business and there were no easy GST collection options available to the government.
“I was surprised that they’ve taken this step so late in the game,” Gasser said of the eBay geoblocking threat.
“The provisions that would capture entities like eBay have been there in one form or another since this was announced,” he told Bloomberg BNA by phone April 18. “I wouldn’t think they were unexpected.”
“They mirror the changes that were made as part of the ‘Netflix tax’,” he added.
“There were probably no good options here for the government if they wanted to tax low-value goods,” Gasser said.
The government “probably picked the better of the options” as it won’t slow goods at the border nor require customers to directly pay GST on each transaction, he said.
“Europe has been making similar changes,” Gasser added, noting that Australia’s A$1,000 threshold was quite high by international standards.
Tony Windle, Brisbane-based national head of indirect tax at Grant Thornton, said the policy goal of the bill was welcome and agreed the current A$1,000 exemption threshold is “disproportionately generous.”
However, administration is going to be a problem, just as it will be with Australia’s new Netflix tax, he said.
“There will be significant pressures on the Australian Taxation Office’s IT infrastructure and administrative procedures to bring all of these new participants into the Australian GST net,” he said.
Windle added that Australia’s proposed collection method, which will collect from online marketplaces or directly from suppliers depending on the circumstances, “has never been tested anywhere.”
Meanwhile, freight businesses including FedEx Corp. have criticized what they view as a favorable exemption for Australia Post that won’t be available to them, even though they directly compete for business.
FedEx says it isn’t fair that the legislation would require express delivery companies to capture and report vendor registration numbers when Australia Post would be exempt from the requirement.
The company added that the obligation would result in “substantial changes to FedEx worldwide IT systems,” but said it welcomes the fact that the bill doesn’t envisage making freight companies responsible for GST collection.
The bill is still before the House of Representatives.
The Senate Economics Committee is due to report on the legislation by May 9.
To contact the reporter responsible for 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
The Treasury Laws Amendment (GST Low Value Goods) Bill 2017 and related materials are available at http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr5819%22.
Details of the inquiry into the bill by the Senate Standing Committee on Economics are available at http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/GSTLowValueGoods.
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)