Australia Post hits back at Amazon over GST collection

Andrew Munro 20 September 2017 NEWS

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Collecting tax is easier on paper.

Australia Post and parcel delivery services, and online retailers like Amazon, Alibaba, eBay and Etsy are scuffling over upcoming changes to Australian GST laws. The main question is who's going to be responsible for actually collecting the GST that needs to be paid on imported goods.

The initial argument

The plan was to apply 10% GST tax to goods that were sold online and imported to Australia by international sellers It was going to start on 1 July 2017, but was then pushed back to 1 July 2018, for time to settle some arguments and work out practicalities. Currently, involved parties are submitting their arguments to the Productivity Commission.

One of the main problems is that collecting GST on international online purchases would cost more than it brings in, and isn't worth the effort for the tax office. Therefore, the problem needs to be forced onto someone else. Right now, the involved parties are arguing about who it's going to be.

No one wants to collect the tax on low value imported goods because it's going to be a huge and expensive administrative burden, and risks ticking off international sellers.

The current argument

In a joint proposal submitted to the Productivity Commission on 30 August, eBay, Alibaba and Etsy argued that they were "Electronic Distribution Platforms" (EDPs) rather than sellers, and that therefore they rightfully weren't responsible for GST anyway and shouldn't have to bear the cost of collecting it. Plus, if an EDP were to try collecting GST from its users, it would just look like an additional fee for selling to Australians.

As such, some online marketplaces have said that if they were forced to collect GST they'd simply block Australians from buying off international sellers instead. They pointed out that this wouldn't help anyone. Shoppers would be fewer options, sellers would have fewer buyers and Australia wouldn't be getting any more tax revenue anyway.

As an alternative, these EDPs have suggested that GST be collected by Australia Post and other parcel delivery services. They argued that these delivery services are in the best position to collect the tax.

"Logistics providers already have infrastructure in place to collect information on goods coming into Australia and have well-established processes for GST collection for goods valued at more than $1,000," Amazon pointed out in a submission.

Australia Post has now hit back in submissions of its own, pointing out that it can't feasibly collect GST either.

The counterargument

In its own submission, Australia Post said that EDPs should be the ones collecting GST, and that it simply wasn't in a position to start.

One of the main problems is that there's currently no real way of knowing whether a parcel is coming into Australia because it's a gift, or because it was purchased online from an international seller. Therefore they can't really say whether or not it should be taxed.

It may also be worth noting that Australia Post might be legally required to hit back against the idea of collecting GST, pointing out in its submission that "Australia Post is a Government Business Enterprise and is obliged to perform its functions in a manner consistent with sound commercial practice." If taking on the burden wouldn't be good business, then Australia Post may be legally required to hit back against the idea.

The crux of the argument

The problem is that more shopping is moving online, which is taking a serious bite out of tax revenues. The low value imported goods tax is a sensible solution on paper, but currently doesn't seem to be workable.

  • It's not viable for the government to collect the taxes. It's been estimated that it would cost about $60 per transaction to actually collect the GST on low value imported goods. But the average value of these goods is $100, so collecting taxes on them would be a net loss.
  • There's no way to make EDPs collect the taxes. Blocking Australians from buying internationally would simply be common sense for EDPs. Ordering them to pick up the taxes would most likely just stifle the market and not lead to any more revenue.
  • It's not viable for Australia Post or delivery services to collect the taxes. They're currently not in a position to feasibly collect GST on low value imports.
What's going to happen?

It's not possible to speculate on the most possible outcome, but at this stage it seems possible that the low value imported goods tax will be postponed once again in 2018, and might be held off indefinitely.

Alternatively, the Australian government might force GST collection on EDPs anyway for the purposes of driving away international competition and protecting incumbent bricks and mortar retailers. Many Australian companies would be thrilled with this outcome. Shoppers less so. It might also be bad news for Australian online marketplaces that import from internationally.

In the long run, the most workable solution might be to find a way for Australia Post and delivery services to collect GST. But as long as Australia Post is legally required to protect its own business interests as a Government Business Enterprise, implementing this might keep being slower and more painful than it needs to be, for no real reason.

But right now, it doesn't mean a lot for buyers and there's not much you can do other than sit back and enjoy the GST-free online shopping wherever you can.

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