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PC News - December 2017

Collection models for GST on low value imported goods

A short Commission inquiry confirmed that a model being implemented by the Government to collect GST on low value imported goods is the most feasible and practical approach currently available.

Online imports of low value goods ($1000 or less) shipped directly to Australian consumers are exempt from GST. Domestic retailers, whose sales are subject to GST, have long argued that the exemption unfairly advantages imports and harms local businesses. As online sales have grown, so have their concerns.

In June 2017, the Australian Parliament legislated that large foreign suppliers (including online marketplaces such as eBay) will be required to assess, collect and remit the GST on low value imported goods consigned to consumers in Australia. The Parliament also directed that the Commission check that this collection model is the best available, ahead of its implementation date of July 2018.

The Commission concluded that the legislated model, while imperfect, is the most suitable at this time. Although the model will impose significant burdens on foreign suppliers and will not be straight-forward to enforce, it will help to improve tax neutrality, avoid disruption for consumers and should generate a modest revenue gain.

Among the alternatives, models that rely on collection by delivery agents could capture more revenue, but their feasibility is hampered by the paper-based declaration processes still used in international mail and the need for Australia Post to negotiate agreements with myriad other postal services. They would also impose much higher administrative and compliance costs, and could inconvenience consumers.

Other collection models, placing responsibility for GST on the consumer in Australia or on ‘financial intermediaries’ (such as banks and credit card schemes) are infeasible, due to the challenges of inducing consumers to remit GST and the lack of sufficient information collected by financial intermediaries. Advanced technological solutions may reduce or resolve these issues, but are untested and could not be deployed by mid-2018.

However, the suitability of some alternative models may improve over time. Although the Commission did not see sufficient reason to delay implementation, it did recommend reviewing the legislated model and the suitability of alternatives after five years (or sooner if triggered by adverse events). The Commission also discussed some possible improvements to the legislated model and its enforcement strategy, which could be considered if the model does not perform as expected.

Collection Models for GST on Low Value Imported Goods

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