Just four months after new laws were slapped GST on imports valued at less than $1,000, concern is mounting that many international retailers are shirking their tax obligations.
Back in May, then Treasurer Scott Morrison said changes to GST laws to require international retailers to collect and remit GST on low-value purchases would “level the playing field” for local businesses.
However, in the months since the highly-anticipated reforms have come into effect, it appears not everyone is playing ball.
SmartCompany has seen evidence that several online technology retailers selling goods into Australia are not collecting or remitting GST on low-value imports.
Email correspondence shows that several online retailers, based in Hong Kong, have told customers they aren’t responsible for GST.
But in one case, online retailer Digital Rev, based in Hong Kong, told a shopper via email that customers are responsible for duties and taxes levied in their countries.
It advised the customer to contact their local customs office for further detail.
Digital Rev did not respond to a request for comment, but says on its website that the prices of goods quoted on its website is exclusive of tax that customers may have to “pay in addition”.
Another online retailer, Becextech, owned by BXT International Ltd, told a customer in an email seen by SmartCompany that there was no GST applicable on the sale of a Samsung Galaxy S9 for $849 plus $74 in delivery charges.
A comparable product is selling on Harvey Norman and JB Hi-Fi for $1199, not including shipping.
Hong Kong-based BXT International, listed as the company customers purchase products from on Bexectech’s website, was the subject of an ACCC enforceable undertaking last December over allegations of product misrepresentation.
BXT did not respond to a request to comment, but on its website says that prices of goods include applicable import taxes.
In another case, retailer T-Dimension, based in Hong Kong, refused to provide a customer with a GST invoice, saying it could only provide a “commercial invoice”.
Businesses registered to collect GST are required to provide tax invoices to customers on request within 28 days.
T-Dimension did not respond to a request for comment but makes explicit references to the low-value GST changes on its website.
“Start from 1/7/2018, all orders under au$1000 will include GST. for orders over au $1000 [sic], the customs may impose it on delivery,” it says.
DWI International, which sells digital cameras online, includes a 10% GST charge on products explicitly within its checkout process, but SmartCompany has seen a tax invoice provided by the company that does not include an ABN.
DWI Digital Cameras identifies its business as DWI International on its website, however, an ABN register search for the business did not turn up a match.
DWI International did not respond to a request to comment.
It is understood all of the businesses mentioned in this report exceed the $75,000 annual revenue threshold that requires businesses to sign up for GST collection.
A spokesperson for the Australian Taxation Office (ATO) declined to confirm whether any of the businesses mentioned in this report were registered to collect GST, citing confidentiality.
“The ATO has worked closely with businesses to engage and support them. All major platforms and many suppliers have registered and are complying,” the spokesperson said.
“We have made our compliance views clear and communicated them widely. We are following up with businesses that haven’t registered that we believe should have registered.”
The spokesperson said businesses found to be not complying with the law could be subject to debt recovery action in foreign courts, garnisheeing of payments from Australia, and administrative penalties.
“Widespread avoidance of GST”
The conduct raises questions about the effectiveness of the GST reforms and whether they’re delivering on their stated aim of levelling the playing field for Australian retailers.
Earlier this week listed e-commerce business Kogan.com reported a 27.4% decline in quarterly revenue from its global brands, blaming “widespread non-compliance” with GST laws.
“Widespread avoidance of GST has become apparent,” the company said in a statement.
Gross margin also fell, while Kogan to inform its shareholders that it was unable to say when compliance would improve.
There have been long-standing concerns about compliance with low-value GST from academics and large international marketplaces like eBay and Amazon.
Ebay, which was critical of the reforms during public consultation, revealed last yearthat Treasury modelling found that compliance rates would be as low as 25% with the new tax under a model where retailers collect and remit GST.
Amazon, which was also critical of the changes, commissioned KPMG modelling which found compliance would be as high as 70% if delivery providers like Australia Post collected the GST.
Concerns were raised though, including by Australia Post, that a so-called “logistics model” would be expensive and create shipping delays.
Others, including UNSW Tax academic Kathrin Bain, argued that Australia’s mail regime was insufficient to promote proper compliance with the new tax and that it was not clear how the ATO would deal with non-compliant businesses.
Bain tells SmartCompany that she wouldn’t be surprised if the compliance rate currently was as low as 25%, but believes the ATO needs to be given time to do its job.
“It doesn’t surprise me when it was first proposed the ATO at that point didn’t have figures on how many companies it would impact,” she says.
“In some ways, we need to give the ATO some time though.”
Bain says she doesn’t think the way that the system is structured will ever level the playing field for Australian businesses.
“I don’t think it will ever level the playing field, in terms of how it’s structured.”
The Government delayed the implementation of the legislation by twelve months to 1 July 2018 after pressure from Labor for more robust consultation, but while a productivity commission review of the changes was conducted, the collection model was unchanged.
The productivity commission recommended that the government undertake a reviewof the legislation five years after its implementation, unless “exceptional circumstances” such as extremely low compliance were identified.
SmartCompany understands figures are due out in November on how much has been collected under the low-value GST regime so far.
Treasury estimates from last year show that the government hoped to generate $390 million through the new tax.
Australian Retailers Association (ARA) executive director Russell Zimmerman, who championed the reforms, said it would be “very concerning” if international retailers were not complying with the law.
He said the ARA has had long-standing concerns about compliance with low-value GST.
“We didn’t think the low-value threshold, the way it was designed, was going to be successful,” he tells SmartCompany.