The Turnbull government has proposed to eliminate the $1000 GST free threshold for imported goods which is effectively a tariff on low value goods and services. Davidson and Berg have produced an article that explores the various impacts it will have on the Australian economy and the concerns that must be addressed.
In 2011, the Productivity Commission also found that the requirements to assess GST liability would lead to higher regulatory costs that would exceed the extra revenue it attempts to raise. The article expresses the implications of the government aiming to require foreign online retailers to process this for them. They note issues regarding the propensity for less well-known sellers on the internet who will aim to circumvent this new rule as they sell products that are less reliable and engage in dodgy practices in order to not charge GST and escape detection. Potential issues regarding this tax administration include the antithetical approach that conflicts with Australia’s stance on free trade at an international level.
“[T]he way the government proposes to implement this measure constitutes an exercise in extraterritorial power. The commonwealth Treasury does not have jurisdiction over eBay (headquartered in San Jose, California) or Amazon (headquartered in Seattle). Attempting to rope them into our tax system will place the Australian government in conflict with our major trading partners. At the very least this should generate trade disputes at the World Trade Organisation.”
As the legislation is currently before parliament, the Senate Committee inquiry will announce its view on the legislation on the day that Morrison releases the 2017 budget which Australian consumers and small businesses shall wait anxiously for.
The article by Sinclair Davidson and Chris Berg can be read here.
Brendon Zhu is a Research Associate at the Australian Taxpayers' Alliance.