Review on low value GST looms

GST, goods and services taxThe Productivity Commission will conduct an inquiry into charging GST on low value imports before the end of the year, under an amendment made to legislation in the Senate yesterday.

During debate over a long-awaited change that would see GST collected on imported goods valued below $1000 yesterday, Labor Senator Katy Gallagher moved to ensure a review of alternative tax collection models that could change the implementation of the legislation.

The amendment will see the Productivity Commission deliver a report on the feasibility of alternative models, as well as other relevant matters to the operation of GST collection on low value imports, by 31 October 2017 – well before the current 1 July 2018 implementation date.

The legislation, which local retailers have long argued for as a necessity for taxation fairness with international competitors, has now been returned to the Lower House and is expected to pass without further changes.

However, the impending inquiry could see changes made to the implementation of the Bill, including the proposed vendor-hybrid collection model.

The current vendor-hybrid model requires international marketplaces to collect and remit GST from third party sales on their platforms, which is believed to be unworkable and ineffective by the likes of Amazon, Alibaba, Etsy and Ebay.

Those e-commerce companies advocate a logistics model that would see the likes of Australia Post collecting and remitting GST on low value goods. However, Australia Post has previously said it would be unable to facilitate such an operation.

The commission will be required to hold public hearings in the process of the inquiry and make recommendations based on its findings.

The Australian Retailers Association (ARA) had originally advocated for the customary two-year review of the legislation and still supports the model proposed by Government.

Assistant Shadow Treasurer Andrew Leigh believes that figure is unacceptable and that a better outcome could be reached through further consultation.

ARA executive director Russell Zimmerman told Inside Retail yesterday that the ARA was open to considering other models, provided they delivered a better outcome for retailers.

“We need to use this 12 months to get in the best result that we can,” Zimmerman said. “Our view is that the model proposed, although not perfect, is a really good way of implementing it, however if someone can give us a better model that can be implemented effectively we’ll look at it.”

Both Zimmerman and National Retailers Association chief executive Dominique Lamb said that it was disappointing that the implementation of the changes had been delayed from the initial 1 July 2017 start date.

“While a 2017 implementation date would have gone a long way to helping Australian retailers level the playing field with their overseas counterparts, the logistics surrounding its implementation are challenging, and need considerable time to iron out,” Lamb said.

Previous research conducted by KPMG and based on Treasury figures indicate that the expected compliance rate under the current vendor-hybrid model is as low as 25 per cent.

An international debate has taken place in recent years surrounding the best way to implement low value GST collection on imports, but no definitive conclusion has been reached. The OECD is due to release a highly anticipated report on the matter in the coming years.

The Greens unsuccessfully pushed for an amendment to the Bill on Monday that would have seen sanitary products such as tampons and pads exempted from the GST changes.

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