Canberra's new online shopping tax is up for debate in parliament today despite a lengthy senate inquiry that failed to produce clear answers about its impact on our consumers, our international trade relationships or even how its compliance will be ensured, with major online marketplaces including Ebay, Amazon and Alibaba threatening to cease selling to Australians over the potential impact on their business.
As things currently stand, goods we order from overseas below $1,000 in value do not attract a 10% GST. The rationale is that the cost of collecting this tax would cost the government far more in time and resources than any revenue it would raise, with our major trading partners relying on similar thresholds.
The new proposal, first introduced by Joe Hockey, would eliminate this threshold, slugging online shoppers with a significant price hike. The responsibility for revenue collection passes from the government - not to the sellers, but to the online marketplace platforms themselves.
The problem with this model is that it forces platforms which connect buyer and seller and which often do not deal with the goods or even the payment process themselves, to effectively become revenue collection agents for Canberra by registering with the ATO. Not only would this impose a substantial burden on these platforms to come up with new accounting mechanisms from scratch, but any costs associated will inevitably be passed on to us, the consumers.
The government also says that it will specifically target larger companies, with only those generating more than $75,000 in revenue a year required to even register. This makes it likely that smaller, sometimes dubious sites which are unable to provide the kinds of consumer security protections given by larger sites will become more attractive to Australian consumers, exposing millions of Australians to potential fraud, phishing or scams with little practical legal recourse. There is also no real way to even verify the revenue of individual foreign sites to check if they are eligible for registration as these records are located overseas. It is likely that only the largest, most well-known online platforms will even make an effort to comply with the tax.
The move will also fuel existing disenchantment over rising costs of living and it's hard to see the government's rationale for it when there is mounting evidence that it will fail to do anything it intends.
First, it is unlikely to make our domestic retail sector competitive – with independent research from the Institute of Public Affairs finding price differentials of up to 70% for a range of products sold here versus identical items available online from overseas. A new tax will only marginally reduce these differences, with the high cost of doing business in Australia, red tape and strict land zoning laws having a far greater impact on why our sellers can't have a fair go. It also won't raise much revenue, with the government's own data confirming that it will only generate approximately 1% of total GST revenue.
The tax could also trigger tariff retaliation from our major partners whose thresholds remain in place. American consumers currently benefit from an even higher GST-free threshold on our exports than what we impose on imports here, with President Trump making it clear that he is prepared to withdraw from arrangements with America's trading partners if these prejudice domestic business. There is a similar risk that our partners in painstakingly negotiated trade deals across the Asia-Pacific region will call us back to the negotiating table since the move is set to hurt their businesses and sellers. It could hence potentially risk the livelihoods and employment of many Australian workers, families and small businesses engaged in exports or depending on raw materials from overseas.
The senate inquiry earlier this year recommended that a comprehensive assessment of the radical proposal's impact be taken with treasury officials unable to offer certainty about how much the tax would cost to enforce or whether compliance could be guaranteed. This is a tax which raises little revenue and fails to create a level-playing field for our businesses. It will hurt our consumers, our exporters and our foreign relationships. The government should scrap it and return to the core liberal principles of encouraging individual freedom, trade and enterprise if the LNP's electoral fortunes are to be restored.
Satya Marar is Director of Policy at the Australian Taxpayers' Alliance
[This article first appeared in Online Opinion]