Time Runs Short For Online Platforms Opposed To Australian GST Law

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By Murray Griffin

Online marketplaces including eBay and Amazon will know in three months whether they have any chance of overturning a new requirement to collect and remit goods and services tax on inexpensive imported goods sold into Australia via their platforms.

An eBay Inc. spokesman July 31 told Bloomberg BNA by email that online marketplaces consider the new legislative requirement, due to start in mid-2018, “unworkable.”

That claim is about to be put to the test, with the government’s main economic advisory agency issuing a discussion paper July 28 for a fast-track inquiry to examine whether there is a better way to collect GST on imports of these goods sold to Australian consumers.

As part of an inquiry into the GST collection model, independent economic advisers to the government, the Productivity Commission, have called for “evidence-heavy” submissions by Aug. 30. The commission is set to release its final report on October 31.

The commission is inquiring into a new law that will axe an existing GST exemption provided for imports worth A$1,000 ($797.60) or less.

MinterEllison partner Bastian Gasser said the commission provided “a very good summary of the history of this issue and the drawbacks inherent in each of the options for collecting GST on low value goods.”

“There are no easy ways of collecting this GST,” he told Bloomberg BNA July 31 in emailed comments.

The commission had also made it clear that it wouldn’t accept at face-value statements by online marketplaces that they would incur large compliance costs as a result of the legislation, but expected them to provide evidence to back up their claims, Gasser noted.

Collection Model Opposed

Few interest groups or politicians took issue with the aim of the new law to end the existing exemption, to level the playing field between domestic retailers—that already pay GST on cheap goods—and overseas businesses.

But its unique collection model was bitterly opposed by online marketplaces, expected to be accountable for collecting and remitting GST. Redeliverer services, which provide offshore mail or shopping services and assist in arranging delivery of the goods, also opposed the model.

Some politicians also had doubts, and the government only succeeded in steering the bill through parliament after agreeing to an inquiry by the commission to examine whether the new regime should have a different collection model.

The arrangement means that the default legislative requirement is that online marketplaces such as Amazon.com Inc., eBay, Etsy and Alibaba Group Holding Ltd. will pay GST on goods traded via their platforms from July 1 next year, as will redelivery services.

But a finding by the commission that there is a better collection method would place substantial political pressure on the government to amend the legislation before the new requirement takes effect.

A spokesperson for eBay July 31 told Bloomberg BNA by email that the company “understands the need for a level playing field but welcomes the review by the Productivity Commission.”

Major online businesses made it clear during a senate committee inquiry into the bill that the proposed GST collection regime was “unworkable,” the spokesperson said.

“We look forward to working with government and the industry on methods of implementation that drive revenue, help level the playing field for Australian businesses and maintain choice for shoppers,” the spokesperson said.

Discussion Paper

The commission specified that it will focus on only two GST collection models—the one already legislated, and another put forward in 2012 by a government-commissioned parcel processing taskforce.

The 2012 taskforce proposed a model in which customs authorities are responsible for determining the GST liability on low-value parcels, but the goods are then released to the transporter, which is responsible for collecting and remitting it.

The commission’s new discussion paper said the parcel processing taskforce approach was favored by compani,es including Amazon, eBay, Alibaba and Etsy Inc.

However, it noted that the parcel processing approach was opposed by Australia Post and by a courier association that represents businesses including DHL, UPS and FedEx, due to concerns about high compliance costs.

Australian consumer group Choice argued that a similar model in the UK had led to parcel delivery delays and high processing costs that were passed on to consumers, the commission adds.

The discussion paper said the legislated model that would impose GST obligations on online marketplaces and redeliverers “has no direct overseas precedent,” making it difficult to quantify its likely impacts.

However, it also noted that other countries are considering similar models, “which suggests that developing systems to collect and remit GST or value added taxes is likely to become an inevitable cost of doing business” for these online companies.

The commission called for submissions on the feasibility of the two options, as well as their ramifications for tax neutrality between domestic and foreign suppliers, GST revenues, administrative costs and compliance costs.

Public Hearings

The commission will hold public hearings in Sydney (Aug. 22) and Melbourne (Aug. 24).

Meanwhile, the Australian Taxation Office is currently reviewing comment received on two draft law companion guidelines about the new GST arrangements for imported low-value goods.

Amazon, FedEx and the association representing Asia-Pacific freight companies didn’t respond to Bloomberg BNA’s requests for comment.

To contact the reporter responsible for this story: Murray Griffin in Melbourne at correspondents@bna.com

To contact the editor responsible for this story:

For More Information

The Productivity Commission's ’Collection Models for GST on Low Value Imported Goods: Discussion Paper’ is available at http://www.pc.gov.au/inquiries/current/collection-models/discussion/collection-models-discussion.pdf

The Treasury Laws Amendment (GST Low Value Goods) Bill 2017, as passed by parliament, is available at http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr5819%22

Australian Taxation Office information on the new law is available at https://www.ato.gov.au/General/New-legislation/In-detail/Indirect-taxes/GST/GST-on-low-value-imported-goods/

An ATO draft companion guideline ’LCG 2017/D4: GST on supplies made through electronic distribution platforms' is available at https://www.ato.gov.au/law/view/document?DocID=COG/LCG20174/NAT/ATO/00001

An ATO draft companion guideline ’ LCG 2017/D5: When is a redeliverer responsible for GST on a supply of low value imported goods?’ is available at https://www.ato.gov.au/law/view/document?DocID=COG/LCG20175/NAT/ATO/00001

The 2012 report of the Low Value Parcel Processing Taskforce is available at http://www.treasury.gov.au/PublicationsAndMedia/Publications/2012/Low-Value-Parcel-Processing

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