The internet trade sector faces mayhem with the inquiry on GST collection on low value goods further shortening the implementation timeframe.
On 23 March 2017, the Senate referred the provisions of the Treasury Laws Amendment (GST Low Value Goods) Bill 2017 to the Senate Economics Legislation Committee for inquiry and report.
The bill proposes to amend i) A New Tax System (Goods and Services Tax) Act 1999 to ensure that goods and services tax is payable on certain supplies of low value goods that are purchased by consumers and are imported into Australia; and ii) Taxation Administration Act 1953 (TAA) to broaden administrative penalties for making false or misleading statements.
The Committee is due to report to the Senate by 9 May 2017.
Freight & Trade Alliance (FTA) accepted an invitation from the Committee to provide feedback following our earlier engagement with the Department of Immigration and Border Protection, the Australian Taxation Office and Treasury – below is a summary of the main points from our formal submission:
Submission scope
The bill brings with it considerable complexity for industry in managing separate processes. Revenue collection at the border will remain for goods with a Value of Taxable Importation over $1,000 AUD using a Full Import Declaration via the Integrated Cargo System (ICS).
If passed, the legislation will mean that "overseas vendors", "electronic distribution platforms" and "redeliverers" will have to account for GST on sales of low value goods to consumers in Australia if they have GST turnover of $75,000 or more.
This hybrid model will force new cargo reporting and clearance requirements associated with the import of low value cargo on international freight forwarders, express carriers and licensed customs brokers.
Accordingly, the primary focus of the FTA submission submitted to Treasury on 2 December 2016 and 23 January 2017 centred on the operational impacts affecting these sectors of Australian commerce.
Intent of the legislation
As consistently highlighted in the previous FTA submissions, merit is seen in terms of the intent of the legislation to ensure that low value goods face an equivalent GST treatment to goods sourced in Australia. Importantly, the legislation will generate a significant quantum of GST revenue.
It is noted that Australia would be the first country to apply GST to the importation of low value goods using a "vendor collection model", with jurisdictions such as the European Union moving in the same direction. Consumers and affected sectors of Australian commerce are at risk of facing complications by the introduction of a new, untested and complex tax regime.
Implementation timeframe
FTA sees the largest risk to implementation being the short window from the eventual passing of the legislation to "go live" on 1 July 2017. The Australian import sector still vividly recalls the flawed Integrated Cargo System (ICS) implementation in October 2005 that brought Australian ports and airports to a grinding halt.
It is imperative that history is not repeated and that adequate time is provided to allow industry to design, scope, budget, implement and test systems.
In contrast, legislation applying the GST to international sales of digital products and services provided to Australian consumers received Royal Assent on 5 May 2016 with the measures to apply from 1 July 2017.
We commend the government for supporting this sector of commerce by providing an appropriate implementation timeframe. We are at a loss to understand why a similar implementation timeframe has not been considered for the significantly more complex changes associated with the proposed changes for low value imported goods.
Recommendation 1. Defer implementation of the low value imported goods reforms to provide industry a minimum of 12 months for "go live" after the bill receives Royal Assent.
Compliance
We understand from our consultation that the Australian Taxation Office intends to take a considered and reasonable approach to compliance activity as industry implements the low value imported goods reforms.
Whilst we support this approach, it is essential that a tough stance is taken on vendors deliberately avoiding GST payments and gaining a commercial advantage over compliant entities. This threat is greater for goods arriving via post that is not subject to cargo reporting and Self Assessment Clearance (SAC) processing.
Recommendation 2. Informed compliance measures be introduced to deter fraudulent activity and to ensure that postal and cargo handling services operate on a "level playing field"
We note the introduction of Section 84-53 and the relevant penalty in Section 288-46 in Sch 1 to the TAA. Our understanding is that this penalty may be imposed on "overseas vendors", "electronic distribution platforms" and "redeliverers" if reasonable steps are not taken to supply prescribed information to entities completing declarations at the border.
Recommendation 3. We seek further engagement with compliance enforcement agencies to gain an understanding of potential implications to entities responsible for completing declarations at the border including international freight forwarders, express carriers and licensed customs brokers.
Paul Zalai – FTA / APSA