Money Your Budget Delay the online shopping tax, Senate committee to urge government

Delay the online shopping tax, Senate committee to urge government

Ebay threatens to abolish foreign purchases under $1000
eBay has threatened to block Australians from making foreign purchases if the law proceeds. Image: Simon Rankin
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Shoppers may be about to get a reprieve on the 10 per cent price hike on goods purchased online with a senate revolt likely to delay the measure, which was due to start on July 1.

Liberal, Labor and crossbench senators will urge the government to abandon its attempt to force eBay, Amazon and other popular websites to begin charing GST on all purchases below $1000, the current level at which the tax kicks in.

Liberal Senator Jane Hume, chair of the Economics Legislation Committee, said evidence submitted on Friday had convinced her of the need for an indefinite delay.

“Look, the model that’s been proposed was announced in August 2015. However, it’s quite understandable that those companies to whom it applies wouldn’t be prepared or have made the necessary changes until after the legislation was actually passed,” Senator Hume told The New Daily.

“As a committee, we heard the concerns of those witnesses and I think a delay in implementation is probably a good compromise solution.”

The senator declined to give a time limit. “That’s going to be up to the Treasurer,” she said, “but I think the report from the committee will recommend a delay of some stretch.”

On Friday, the committee grilled Treasury, the Australian Taxation Office and big retailers on how hard it would be to impose the tax. An ATO employee said the agency would have to rely on “good will”, pressure from overseas tax agencies and the risk of reputation damage to get eBay and others to charge the tax.

Senator Nick Xenophon, a member of the committee, told The New Daily he was also convinced on Friday that the government’s collection model would be “a mess”, “a train wreck” and “completely impractical”.

“The legislation ought to be delayed given what’s been uncovered in the report. This policy is about levelling the playing field, not scorching the earth.”

Shadow Assistant Treasurer Dr Andrew Leigh said “this is yet another example of Labor setting the agenda”.

“Last week, Labor called for a one-year delay. Today, the Coalition are adopting this position. This is yet another example of Labor setting the agenda just as we did on superannuation tax concessions and cigarette excise,” he told The New Daily.

“It’s better to wait a year and get this right than risk severely disrupting this important and fast-growing part of our economy, and we urge Scott Morrison to consult properly this time with stakeholders and develop a workable model for taxing low-value imports.”

senator jane hume
Committee chair Senator Jane Hume says: “I think the report from the committee will recommend a delay of some stretch.” Photo: AAP

Retailers lobbied hard for the tax back in 2010-2013, when the Australian dollar was above parity with the USD. But now that the AUD is buying about 75 US cents, and factoring in the cost of postage, the need is less pressing.

Last year, 81 per cent of Australian online shopping dollars (roughly $17.5 billion of $21.65 billion) were spent domestically, NAB estimated. And over the year, domestic online sales grew 10.8 per cent compared to 8.6 per cent for foreign purchases.

Currently, GST is only charged on foreign goods if they exceed $1000 in value. Under former treasurer Joe Hockey, the government promised to drop the threshold to $0.

But rather than collect the tax through customs, as it currently does, the low value GST would be collected at the point of sale by all online sellers with more than $75,000 in sales a year – including eBay, Amazon and Alibaba.

The ‘eBay Tax’ was supposed to have passed Parliament earlier this year in time for the July 1 implementation date, but was instead referred to a Senate committee that won’t report until May 9.

Tax law expert Kathrin Bain at UNSW accepted “theoretically” that the tax should be imposed, out of fairness to Australian retailers, but said there was no “easy solution” for enforcement.

“I think they’ve proposed this law without really looking at how it would in practice work,” Ms Bain told The New Daily.

“I certainly think we are going to have to delay it. I don’t think the government will go as far as saying, ‘It’s off the table completely’, but I certainly think they will delay it.

“It may be that the government has to accept that, well, maybe they should work on developing systems so they could much more easily collect it through customs or couriers or Australia Post. And once they’ve developed those systems, then bring it in.”

Labor has accepted the government’s argument that Australian retailers shouldn’t be disadvantaged, so its eventual passage seems inevitable.

These retailers do, after all, pay our wages. Every online shopping dollar spent overseas is a dollar that throws out the trade balance and does nothing to boost employment, anaemic inflation and record-low wage growth.

The problem is that voters hate the idea; vested interests like eBay are threatening to boycott; and it’s very difficult to enforce a tax on foreigners if they don’t voluntarily comply.

A Greens spokesman said “we are reserving our position” pending a party room vote.

The ‘eBay Tax’ is not to be confused with the ‘Netflix Tax’ on intangible goods that has already been enacted and will come into force on July 1.

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