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Australia Urged To Scrap GST On Digital Imports

by Mary Swire, Tax-News.com, Hong Kong Friday, April 14, 2017

An Australian taxpayer advocacy group has joined forces with a coalition of international taxpayer organizations and academics to condemn the Government's plans to abolish the low-value goods and services tax threshold on imports.

In separate submissions to the Senate inquiry into the proposes GST changes, the Australian Taxpayers Alliance and two economists from RMIT University in Melbourne warn lawmakers and the Government that the proposals will drive up prices for consumers, and could lead shoppers towards using less reputable sites when purchasing goods and services online.

"This proposal is bad for business, bad for consumers, and bad for trade," said Tim Andrews, Executive Director of the Australian Taxpayers' Alliance. "If enacted, this great new tax on everything will slug already struggling families with an extra ten percent on books, on shoes, on clothes, on electronics – on anything brought into Australia online."

"To make matters worse, in trying to turn online marketplaces into tax collectors, they are asking for something that might be impossible – and might force some of them to scale back, driving Australian shoppers to black market websites which lack consumer protections," he added.

Legislation currently before parliament requires overseas vendors, electronic distribution platforms, and goods forwarders with an Australian turnover of AUD75,000 (USD56,780) or more to register for, collect, and remit GST for low-value goods supplied to consumers in Australia. The change is due to be introduced on July 1, 2017.

Currently, low value goods – i.e. goods with a customs value of AUD1,000 or less – are generally not subject to GST when imported directly into Australia by the recipient.

The Government intends to review the new arrangements after two years "to ensure they are operating as intended and to take account of any international developments."

In comments made when the draft legislation was published in November 2016, Australian Treasurer Scott Morrison said that the move was intended to align the tax treatment of imports and locally provided goods and services. "The intention is that low value goods imported by consumers in Australia will face equivalent GST treatment to goods that are sourced domestically."

However, in their submission to the Senate inquiry, economists Sinclair Davidson and Chris Berg said that the elimination of the low-value threshold would effectively constitute a new tax on inbound internet trade – "that is, it will function as a tariff imposed on Australian consumers."

They also contend that the measure will be expensive and complicated to administer, but raise relatively small sums in tax revenue.

"The tax is inconsistent with the government's commitment to deregulation, the promotion of international trade, and its innovation agenda," they noted.

"While masqueraded as a tax integrity measure, this tax is clearly intended to operate as a form of protectionism," they added.

A group of 16 taxpayer organizations from around the world have also criticized the GST amendments in a recently published open letter. Describing the measure as "a thinly veiled attempt to tax the Internet," the coalition, said that the legislation "will seriously damage Australia's international standing and the Australian economy."

They also raised the possibility that other countries may retaliate against the GST changes by introducing similar laws of their own.

"Imposing GST on all imported goods will be damaging to many Australian businesses exporting to other countries and damage trade relations between Australia and other nations," the organizations wrote. "Complaints of the unfairness of international competition will only create a political environment in these other nations that will pressure them to respond in kind."

The group is also concerned about the ability of online marketplace providers to enforce the changes.

"For large providers like eBay, Alibaba, ETSY, and Amazon Marketplace, which each deal with millions of sales internationally per day, and do not hold the goods in question, collecting GST is not feasible and there is significant evidence that they shall not be able to meet the compliance burdens by July 1," the letter said.

The letter was signed by representatives from Americans for Tax Reform, the Canadian Taxpayers' Federation, the New Zealand Taxpayers Union, the Spanish Taxpayers Union, and the United Kingdom Taxpayers' Alliance, among others.

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