The move will see the e-commerce giant launch a new global store to provide local shoppers with international products, effectively adding more than four million new items to its local platform that were previously not available.
GST will be collected on all sales through the platform, ensuring compliance with new regulation that leaves it liable for collecting tax on purchases Australians make on its overseas websites.
Customers have expressed anger over the decision, as Amazon’s US range is still much larger than the extended Australian offer, but Amazon said on Thursday that it had to assess the “workability” of the new legislation.
“While we regret any inconvenience this may cause customers, we have had to assess the workability of the legislation as a global business with multiple international sites,” Amazon said in a statement on Thursday.
Legislation to implement GST on low value imports was passed last year after complaints from local retailers that Ebay and Amazon had an unfair advantage by not having to collect the tax on millions of items.
Amazon’s decision is slated to have a significant impact on the local e-commerce market as its American platform has become popular with local shoppers in recent years, boasting millions of visitors.
After the changes locals will only be able to shop on Amazon’s US platform with a virtual private network (VPN), which will bypass region locking. Freight forwarding would then need to be used to have items delivered to Australia.
While redirecting customers to its Australian marketplace is likely to boost its local business, its also possible that customers will look to Amazon’s competitors such as Ebay.
Responding to Amazon’s decision, Treasurer Scott Morrison said the legislation would ensure multi-nationals paid their fair share of tax in Australia.
“The second biggest company in the world, run by the richest man in the world shouldn’t get a leave pass from paying tax in Australia, and they won’t under these new laws to be introduced from July 1 that level the playing field,” Morrison said in a statement.
“If multinationals aren’t forced to pay their fair share of tax, they will have a competitive advantage over retailers here in Australia, on our own main streets and in our shopping centres.”
KPMG found last year that low value imports are growing between 10 and 16 per cent per year and now represent more than 27 million parcels per annum.
The government hopes that the policy will be a revenue generator for years to come, but customers were taking to Twitter on Thursday afternoon to voice their Anger at both the government and Amazon.
Thanks @amazon and @LiberalAus …no more shipping from Amazon US to Australia. That wouldn’t be a problem if anyone in Australia actually stocked the items I buy from overseas…or didn’t price gouge for other items. Welcome back the 1980’s. #amazon #taxripoff #australia
— biglenslittlelens (@biglenlittlelen) 31 May 2018
Ebay won’t follow suit, working on “major changes”
Ebay lobbied against imposing GST on low value imports and even threatened to block Australian consumers from international sellers if the changes were implemented last year.
But a spokesperson said on Thursday that it would not follow Amazon’s lead.
“Ebay customers love the fact that we have a huge selection of over one billion listings across Ebay’s global marketplaces, so we are working on a solution that enables Aussie buyers to continue to shop from all eBay sites, while also capturing the required GST,” the spokesperson said.
“This requires major changes to eBay’s global systems and we are working to have these ready by 1st July.”
The spokesperson said Ebay’s solution would enable it to collect GST from buyers purchasing in any currency, from any of its sellers.
“It also allows imports to Australia to continue without any structural barriers, redirects or blocks to the buyer experience,” the spokesperson said.
An Alibaba Group spokesperson reiterated the Chinese giant’s prior concerns with the new policy’s GST collection model, but said it was working to ensure it was compliant.
“The implementation of this tax is difficult and requires many changes to Alibaba’s systems,” a spokesperson said.
“At this stage our priority is to ensure that we prepare the business for the change on 1 July 2018 and that the consumer experience on our platforms is not adversely impacted by these changes.”
Amazon’s decision could increase GST compliance
Amazon’s decision is likely to have a positive impact on compliance with the new GST policy, amid ongoing concern that it would have been difficult to implement the changes otherwise.
A host of local retailers lobbied in favour of low value GST legislation for years before they were passed in 2017, despite opposition from the marketplaces.
Harvey Norman chairman Gerry Harvey was a particularly vocal proponent, calling the status quo a loop hole that had created an un-level playing field.
Employer groups such as the Australian Retailers Association (ARA) and National Retailers Association (NRA) also supported the move.
— (((Terry Frost))) (@terryfrost) 31 May 2018
ARA executive director Russell Zimmerman congratulated Amazon on changing its structure to ensure it complied with the new regulation.
“Congratulations to Amazon and to anybody else who is going to collect GST on goods coming into Australia,” he said.
Zimmerman dismissed suggestions Amazon was baulking at the new policy, saying it demonstrated that the business was working with regulators.
“My understanding is that moving forward they would like to work with the government to ensure collection gets stronger,” he said.
Disagreement over model
But Amazon lobbied against the changes before they were legislated last year, arguing that it could not feasibly comply with the regulation because its US marketplace is largely made up of third party sellers.
During consultations Ebay cited Treasury modelling that found a so called ‘vendor collection model’ would yield a tax compliance rate as low as 25 per cent.
This prompted Labor to baulk at the Turnbull government’s handling of the policy and call for additional consultation time, leading to the implementation date being pushed back by twelve months.
Both Amazon and Ebay offered an alternative model whereby Australia Post and others would collect GST on purchases when they came into the country (called a logistics model), but the government-owned postie said this would be a massive burden on its operation.
KPMG, commissioned by Amazon, produced modelling that predicted compliance rates as high as 70 per cent under a logistics model.
But concerns were raised about a logistics model during consultations, including high costs and shipping delays.
Lets get this straight. Nothing prevents #Amazon from charging GST at checkout from their US site other than they want to force Australian consumers to use their .au site. I blame Amazon for this. Best workaround for Aussies is a VPN with a US IP.
— Kat (@BookThingo) 31 May 2018
While Amazon had said the policy would be unworkable, NRA chief Domnique Lamb said on Thursday that its decision to change its model was proof the changes were working.
“Australian retailers were getting the rough end of the pineapple compared with overseas competitors and the new laws to come into effect from July 1 will bring that to an end,” she said.
Amazon’s listed competitors enjoyed a bump with investors on Thursday afternoon in the wake of the news.
Shares in JB Hi-Fi increased by 2.3 per cent to $23.98, while Harvey Norman bounced 1.27 per cent to $3.58.
An international debate has taken place in recent years surrounding the best way to implement low value GST collection on imports as e-commerce continues to grow globally, but no definitive conclusion has been reached.
The OECD is due to release a highly anticipated report on the matter in the coming years.
UPDATED 16:09 AEST