The Federal Government is proceeding with its plans to apply GST to low-value imported goods up to a value of $1000 and if it has its way, Ebay will be one of its top tax collectors!
A ‘vendor registration model’ will be used and suppliers with an Australian turnover of $75,000 or more in a twelve-month period will be required to register and charge GST.
One surprise in the legislation is that ‘an electronic distribution platform’ a category of business which in the legislation virtually describes Ebay, will be regarded as the entity obliged to collect the GST, rather than an Ebay retailer.
If the Federal Government can get Ebay’s cooperation in collecting GST, the tax take will be far larger, as sales from small ‘back-street’ Ebay retailers will be included. (This is all ‘in principle’ mind you – Ebay is theoretically required to pay company tax in Australia, too!)
According to Ebay’s current rules (which seem to be largely ignored) GST has to be included in the item sales price, rather than added during the shopping cart transaction.
The existing procedures involving (occasionally) collecting GST on imports above $1000 at the border are broadly unchanged.
This will create a peculiar situation where goods under $1000 will be subject to GST collection by the retailer or electronic distribution platform, whereas goods over $1000 will be subject to GST and customs charges only on the off chance Border Force actually does its job ‘at the border’. Perhaps they need to think this through…
‘The Government understands Australians are increasingly shopping online from overseas vendors who are able to offer items without tax. This means goods they provide can be cheaper than those offered by Australian businesses giving an unfair advantage to foreign businesses,’ the Minister for Small Business, Michael McCormack is quoted as saying.
‘For many Australian small businesses, this has an impact on competitiveness as consumers flock to purchase cheaper imports.’
Ebay as tax collector
If an ‘electronic distribution platform’ like Ebay or Amazon – widely expected to open a warehouse in Australia this year – indirectly sets any of the terms or conditions for a sale it is obliged to collect GST according to the new legislation. Examples of indirectly setting terms include:
• requiring the offer, acceptance or payment for the goods to be communicated through the electronic distribution platform service (Yes);
• requiring a seller to accept one or more specific payment methods or shipping/delivery methods to be used in fulfilling the transaction (Yes – Paypal);
• reserving the right to withhold the customer’s payment from the supplier until they confirm they are satisfied with the product
• providing a grievance or dispute management procedure for the seller and customers (Yes – EBay Money Back Guarantee);
• requiring suppliers to meet particular performance requirements, such as those relating to the quality of the goods, or requiring them to maintain a particular customer rating to use the platform (Yes); or
• requiring sellers to display a rating based on stipulated behaviours relating to that seller’s conduct on the platform (Yes)
In the extensive supporting documentation for the pending changes, the following ‘Ebay-like’ example is provided…
Example 1.15: Supply through an electronic distribution platform
Laurie purchases a music player on eProcure from Electronix, an overseas seller based in China. Laurie is an Australian resident and is buying the music player for his own personal use. Laurie is not registered for GST. Electronix arranges for the delivery of the music player to Laurie in the ITZ (ie, ‘Indirect Tax Zone’, aka Australia)
eProcure has an Australian GST turnover of $100,000. Accordingly, eProcure is required to register and remit GST on supplies of low value goods that are purchased by consumers through eProcure and brought to the ITZ (ie, Australia) with the assistance of eProcure or the supplier.
A supply of goods is a supply of low value goods if the customs value would have been $1000 or less at the time the consideration was agreed. The digital music player has a customs value of $200. It is therefore a low value good. The supply of this music player is subject to GST as a taxable supply because it is a supply of a low value good that is purchased by a consumer and brought to the ITZ with the assistance of the supplier.
eProcure is a website that allows people and businesses to buy and sell goods worldwide, subject to eProcure’s terms and conditions. Among other things, eProcure requires sellers to allow certain payment methods and provide refunds in particular situations. Accordingly,
eProcure is an electronic distribution platform because it is a service that allows entities to use the platform to make supplies available to end-users that operates by means of electronic communication.
As the supply of the music player was made through eProcure, the operator of eProcure, rather than Electronix, is treated as having made the supply. eProcure cannot agree with Electronix for Electronix to be treated as the supplier as eProcure has indirectly set terms and conditions of the sale through its requirements about sales through the
‘Australia is leading the way in taxing low-value imports. We will be the first country to apply GST to the importation of low-value goods using a vendor collection model,’ the Minister said.
The legislation is scheduled to come into effect on 1 July 2017.
It remains to be seen whether, like company tax, Ebay and Amazon view the new Australian requirements as applying to them. Recent report in The Guardian in the UK point to massive, industrial-scale sales tax (VAT) fraud by sellers on Ebay and Amazon, with the two companies claiming they are not responsible for policing the VAT compliance of independent sellers.
By making the electronic distribution platform, rather than the independent seller, responsible for GST collection, the Australian Government has reduced the two retailing giants’ wriggle room. But frankly, it’s difficult to see them willingly complying with the tax laws of a relatively small economy like Australia.
– Originally published in ProCounter