Amazon, Alibaba, eBay and Etsy may block Australian users if controversial online GST changes go ahead

Source: http://www.news.com.au/finance/business/retail/amazon-alibaba-ebay-and-etsy-may-block-australian-users-if-controversial-online-gst-changes-go-ahead/news-story/3a2d62515b247fc79b927f1db0696ba4

Under new laws slated to come into effect from July 1, overseas businesses with an annual turnover of $75,000 or more will be required to register with the ATO to collect GST on all goods sold, including purchases under the current low-value threshold of $1000.

Giving evidence before a Senate economics committee in Melbourne on Friday, representatives for the companies hit out at the government's vendor collection model, which would place the burden of tax collection on the platforms.

Economists have compared the legislation to taxing a telephone company for a deal arranged between a buyer and seller over the phone. eBay earlier this week described the changes as "unworkable" and warned it may block Australian users.

Quizzed by senators, all four companies confirmed Aussie consumers could be geo-blocked if the bill goes through in its current form.

"Quite honestly we're left with a number of unfavourable options, and [denying access] is our absolute worst-case scenario," said Etsy public policy spokeswoman Angela Steen. "Blocking stay-at-home mums from being able to achieve a sale is frankly devastating for us and our business model."

James Hudson, director government relations at Alibaba, said the "preliminary" assessment of the bill by the Chinese e-commerce giant was that it "may not be able to be applied to Ali Express". "If that's the case we would have no choice but to geoblock Australian users from using the platform," he said.

He added that platforms like Alibaba were unable to navigate the range of GST exemptions, such as for educational materials, and floated a possible compliance levy on Australian importers.

Jooman Park, managing director and vice president for eBay Australia and New Zealand, said even if the time frame were extended, the online retailer would likely not comply. "It is a huge, global business risk," he said.

"Even if we were given [more time], we are not sure we will end up making the decision to create this tax collection capability. We run an $80 billion business based on one global platform. Your requirement is almost the same as just developing a separate Australian site.

"It will cost a lot to invest, and second, under the bill we are subject to the financial risk — if our sellers refuse to pay GST, we are liable for that. We don't understand why have to take that financial risk."

Mr Park added that eBay was concerned about the global impact on its business. "If we start to collect tax here in Australia, we have to assume other countries or governments will start to ask eBay to collect GST or VAT," he said. "So it does not just affect our import business in Australia, we have to assume it will impact all of our cross-border trading."

Roger Somerville, Amazon's head of public policy for Asia Pacific, said in his decades of experience with cross-border trade tax policy development, there "has never been a tax of this magnitude".

"The vastness and complexity, the number of players we're talking about, which grows daily as cross-border commerce takes hold, it's difficult to quantify what the implementation costs are, as well as any impact on revenue," he said.

"From our perspective that's going to be dictated by the behaviour of the consumers, so there's a big challenge how we go about this. Timing — I don't see timing as a solution. It really doesn't fix the fundamental flaws in the collection model."

Mr Somerville said retailers would typically be given several years to prepare for changes of this scale. Online retailers were only informed of the vendor collection model when the draft bill was released late last year, and didn't see the detail until the bill was introduced into parliament in February.

"A lot of this is going to have to do with the infrastructure that's going to need to be built and continually updated and refreshed to make sure we are linking the appropriate parties," he said. "In a marketplace we don't touch those goods, they're not moving through the Amazon logistics system, so we have to work out where they originate from."

Kristen Foster, director of government relations at eBay, described the government's handling of the issue as "one of the least open consultations we've seen in recent years".

"eBay has lodged a number of letters to government, we lodged submissions to Treasury in December last year, those were not published on the Treasury website which was a concern to us," she said.

"If anything what they did with those submissions was [go] even further down the path of trying to classify marketplaces who do not physically hold the goods as a seller. Certainly if you compare it to the Netflix tax, they were given a very lengthy time to determine how the bill would affect them. We're being asked to comply by July 1. It's near impossible."

Erin Turner, director of campaigns at Choice, said the consumer group was "deeply concerned" about the bill. "We're not opposed to the government collecting GST on low-value goods," she said.

"However any system to collect this tax must raise more revenue than it has in collection costs, and two, it should not lead to unnecessary restrictions on Australian consumers accessing goods, either from companies withdrawing services or companies being blocked [by the government].

"We believe it will lead to high collection costs and restrictions on goods Australian consumers can purchase from overseas. Competition isn't an end in itself — it's meant to be a mechanism by which we deliver benefits to consumers."

Ms Turner also warned against the alternative collection model favoured by Amazon and other online retailers, which would push responsibility for collecting GST onto the logistics companies.

"In the UK, there is an £8 collection fee. So you need to go to the post office to pay the VAT, and pay the fee to pay the VAT, which leads to absurd additional costs," she said.

Modelling by accounting firm KPMG estimates a likely compliance rate with the tax of just 27 per cent. eBay revealed that Treasury and Australian Taxation Office officials cited a 25-30 per cent compliance rate in private meetings.

Earlier appearing before the committee, a Treasury spokesman admitted there had been no Regulatory Impact Statement prepared — in breach of Office of Best Practice guidelines — and US and Chinese governments would not assist in enforcement.

Quizzed on enforcement, the Treasury spokesman was vague, saying the ATO would contact retailers to register for GST — citing an example of calling a London handbag retailer. The ATO's expected admin cost will be $13.8 million.

Opposition finance spokesman Andrew Leigh said while Labor supported applying the GST equally to imports in principle, "Scott Morrison needs to show that his preferred model is workable and enforceable".

"The Senate inquiry was called for a specific reason — a wide range of stakeholders have concerns about Scott Morrison's ability to implement this measure without it having unintended consequences for consumers and small businesses," Mr Leigh said.

"Once upon a time, Scott Morrison used to be referred to as a Prime Minister in waiting. These days, it's clear that he's still got the L-plates on. Today we heard that no Regulatory Impact Statement was conducted, which Treasury admits is a breach of Office of Best Practice guidelines."

frank.chung@news.com.au