Treasury flying blind on online shopping tax

UPDATE: Treasurer Joe Hockey has confirmed the GST will apply to all overseas online purchases from 1 July 2017.

UPDATE: Treasurer Joe Hockey has confirmed the GST will apply to all overseas online purchases from 1 July 2017, although the GST will remain on feminine hygiene products.

“If there is leakage out of the GST, it is our is our responsibility to plug the hole,” Mr Hockey told reporters in Canberra on Friday.

“We are doing it with the unanimous agreement of Labor and Liberal states and territories.”

Mr Hockey said he was confident the additional tax would raise more revenue than it cost to administer. He said the idea of inspecting every parcel that came through was “plainly ridiculous”.

“There were three or four proposals we were looking at, and we think we have the best proposal because it’s consistent with what’s happening internationally,” he said.

“Companies are more willing than they were even a short time ago to comply. There’s many levers we have available to apply pressure.”

EARLIER: Treasury has confirmed it has done no modelling on the economic impact of applying the GST to overseas online purchases under $1000.

A spokeswoman for Mr Hockey last night told news.com.au there had been no modelling carried out, but could not explain why.

It comes as state treasurers prepare to meet in Canberra today, where they are expected to sign off on lowering the low-value import threshold (LVIT), agreed to in principle by state premiers at last month’s COAG meeting.

Debate will centre around the proposed level of the new threshold. Mr Hockey flagged last month that the online GST threshold “could be zero”. Assistant Treasurer Josh Frydenberg said “it was different in different parts of the world”. “We are making headway,” he told news.com.au.

“The breakthrough was at the COAG meeting.”

Mr Hockey told ABC radio he held preliminary discussions on Thursday night and there “appears to be a consensus” to create an equal playing field for Australian businesses.

If they agree, the Federal Government would then need to introduce legislation to push through the change. The retail industry has been pushing for the threshold to be lowered to “level the playing field”, arguing the tax-free purchases unfairly penalise Australian businesses.

Consumer group Choice warned on Thursday that changes to the threshold could lead to consumers paying a ‘parcel pick-up’ tax when buying goods from small online retailers not registered with the Australian Taxation Office to collect GST.

It argues at the same time, the US is heading in the opposite direction, with a bill introduced in the Senate to increase its LVIT from $US200 to $US800, bringing it roughly in line with Australia’s current level.

The government has been arguing that large online retailers such as Amazon and Book Depository already have the ability to add GST to purchases, but Choice argues consumers could be slugged with unexpected costs.

A 2013 report by Ernst & Young, commissioned by the National Retailers Association, suggested Australia introduce a similar system to the UK, which would involve two different processes for collecting GST.

Large retailers with sales over $75,000 per year would be required to register with the ATO, charge the GST upon purchase and pay the tax to the Australian government.

Smaller operators, if they choose not to register, would have to have their packages assessed for GST liability by Australia Post or a private cargo operator, which would incur a processing fee.

“If any change mirrors overseas measures, consumers would have to go to their local parcel pick-up, pay the GST and also pay a ‘parcel pick-up’ tax before they can get what they ordered,” said Choice’s director of campaigns and communications, Matt Levey.

“Under the same approach as the UK system, a $20 book purchased online from an unregistered business could end up costing an extra $2 in GST, plus $16.97 for the parcel pick-up tax.

“It would also throw online retail into chaos, as uncollected parcels ordered from unregistered businesses are left to clog up post offices across the country.

“Paying almost $17 in fees to collect $2 in tax would be crazy economic policy. It’s got nothing to do with raising revenue or removing a 10 per cent price difference — it’s about punishing consumers to protect local retailers from global competition.”

It comes as the Australian Retailers Association, which is pushing for the LVIT to be lowered to zero, urged state treasurers to reach an agreement.

“Extension of GST to international online purchases is crucial to the survival and growth of Australian retailers and the retail industry as a whole,” ARA executive director Russell Zimmerman said in a statement Thursday.

“This is about removing the anomaly and levelling the playing field for Australian-based retailers to ensure our local industry can thrive and compete effectively in what is now a global economy.”

Mr Zimmerman said international retailers already had mechanisms in place to be able to accept GST at the point of purchase. “We don’t envision that this would involve extra effort on their part, and will not incur any additional costs by the Government,” he said.

“While the ARA welcomes this long overdue extension of the GST, it is critical that the process does not stall. The agreeance of State Premiers must also be backed up by State Treasurers tomorrow.”

Choice says it supports levelling the playing field, but only if the LVIT can be reduced while raising net revenue. Mr Levey said if treasurers had found a way to fix the problem, consumers would be “keen to hear the details”.

In a statement last night, a spokeswoman for the Treasurer’s office said: “On Budget night, the Commonwealth Government released for consultation an exposure draft Bill and associated explanatory material that would extend the application of the GST to cross border supplies of digital products and services imported by consumers from 1 July 2017.

“In line with these reforms, the Australian Leaders’ Retreat on 22 July 2015, agreed to broaden the GST to cover overseas online transactions (physical goods) under $1,000.

“At tomorrow’s Tax Workshop of State and Territory Treasurers, the states and territories will discuss the need to develop a way forward for the low value threshold for physical goods including the need for further work to be undertaken to progress the matter.

“Any change to the low value threshold and the GST requires the unanimous agreement of the states.”

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