GST changes: The fix is in?

The Australian Labor Party along with the Conference of Asia Pacific Express Carriers (DHL, Fedex, UPS and TNT) and the Freight and Trade Alliance are calling for a 12-month delay in implementing legislation to impose GST on low-value imports.

The call from Labor follows a Senate Economics Legislation Committee enquiry held last Friday. It is apparently based on Treasury not subjecting the decision to adopt the ‘vendor model’ – in which GST is collected by retailers at the shopping cart check-out stage – to something called a ‘regulation impact statement’.

‘Labor has supported the removal of GST on low-value imports with a feasible model, and remains supportive in principle,’ the shadow treasurer, Chris Bowen, said last Friday. ‘But today’s hearing found the Turnbull government has botched its implementation.’

At the same enquiry eBay, Amazon, Alibaba and Etsy argued for a ‘Logistics’ model – collecting GST on low value goods at the border via freight carriers.

Ebay threatened to block Australians from buying from offshore vendors rather than comply with the new law. 

‘Regrettably, the government’s legislation may force eBay to prevent Australians from buying from foreign sellers,’ Ebay’s vice president and managing director for Australia and New Zealand, Jooman Park, wrote in a submission to the inquiry. – Effectively the ‘take my bat and ball and go home’ argument. 

‘No tax would be paid to Australia and none would be owed. It would raise no revenue, deny Australians access to choice and lessen price competition.’ 

Amazon trumped Ebay in arrogance, noting, ‘The bill imposes an administrative burden on sellers and electronic distribution platforms which will create an inherent disincentive for them to comply’. – In other words, for Amazon, compliance with the laws of the countries within which it operates is dependent on whether it judges the administrative burden acceptable. Breathtaking.

In its submission, the Australian Retailers Association viewed the administrative burden on Amazon in a different light: ‘If making an overseas based business operating in the Australian market [collect GST] harms them by putting them on an equal level with Australian registered businesses that is a good outcome.’

Choice, which presents itself as an Australian consumer advocate but behaves more like a lobbyist against Australian retailers, was predictably negative towards the change, saying it ‘would not lead to fair or simple outcomes’.

‘…the proposed change to the GST LVT will lead to additional costs to Australian consumers, on top of the GST collected,’ said a Choice representative (without explaining how those additional costs might be incurred). Needless to say, the organisation is ‘extremely concerned’. 

So lined up on one side of the debate we have the multinational retailing juggernauts Amazon, Ebay etc, the freight forwarding industry, the Labor Party, and the national consumer lobbyist. On the other side we have the government and one of the many Australian business associations – the Australian Retailers Association.

‘The ARA has been at the forefront of seeking the reduction in the Low Value Threshold since 2009, we have put in submissions to government to almost every inquiry, both Heath Michael (ARA government relations director) and I will be appearing at the Senate Economics Legislation hearings this Friday to again reinstate our case, and to rebut what the Amazon’s and E-bay have put forward,’ ARA executive director Russell Zimmerman told Photo Counter last week.

‘Although the system put forward by the government that retailers register if their turnover is greater than $75,000 PA is not perfect, ARA believes that the system proposed is the best system at this point.

‘We do not support a change to have the collection by freight forwarders or by the Credit card companies.’

Surprisingly, this was the first public hearing on the changed legislation, even though it was first announced by former treasurer Joe Hockey in August 2015, and has passed the second hearing stage in the House of Representatives.

While online retailers have been aware of the looming change, and Joe Hockey flagged the probability the government would opt for a vendor model back in 2015, the delay in public debate until just a few weeks before the change is scheduled to be implemented has provided the online giants with ‘wriggle room’.

Head of Trading AU and NZ, for fashion retailer ASOS, wrote that there is ‘too little time between the finalisation of the legislation and the proposed commencement date’.

‘It seems likely that the new legislation will not be finalised and enacted until May at the earliest, this only leaves one month to implement and test any required changes to both retailers’ systems and those of any third parties involved in the supply chain.’

The ARA anticipated there would be suggestions for a delayed implementation in its submission to the enquiry: ‘Our main concern is the speedy implementation of the policy with proposed registration and other measures needing time to be set up and enforced.

‘…This reform is a long time coming. The retail sector will look very poorly on any delay caused to the implementation and those individuals causing the delay.’

Given that the legislation will be a world first, and so inevitably encounter teething problems, it’s difficult to understand why the Federal Government has left its run so late. Incompetence or self-sabotage? Or perhaps the ‘invisible hand’ of senior Treasury bureaucrats who see the change as against free trade? 

ATO officials said at the enquiry they had compiled a list of 3000 overseas companies that would need to register with Australia’s government to collect GST on the government’s behalf. The majority of low-value imports came from the UK (38 percent) and North America (27 %). Hong Kong, a big player in the sales if digital cameras and lenses, accounts for 8 percent, while China also accounts for 8 percent.

If, as appears more than possible, there is a delay in Australian implementation, Switzerland has legislated a vendor model which will come into effect in January 2018, and other countries are set to follow.

Read the ARA submission on GST on low value imports here: APPLYING TREASURY LAWS AMENDMENT (GST Low Value Goods) Bill 2017 Provisi…