Australia’s “Amazon.com” tax

The Australian Treasurer recently announced that Australian State and Territory treasurers have agreed the GST should apply to cover online transactions where overseas suppliers sell goods under AU$1,000 to Australian consumers. Call it the “Amazon.com tax”?

Australia Post delivery van
Australia Post delivery van (by OSX (own work) [Public domain], via Wikimedia Commons)
This mirrors the recent proposal to apply GST to supplies of digital products and services from overseas providers to Australian consumers, the so-called “Netflix tax” (see my previous post).

Why?

In Government speak, the change would “promote greater integrity in the tax system” and to help to “level the playing field” for Australian retailers.

How would this be done?

The proposed approach for collecting the GST on imported goods is to reduce or remove the “low value importation threshold” for goods from its current level of A$1000 to say, A$20 or even zero.

Also to rely on overseas suppliers registering for, collecting and remitting the Australian GST. Presumably the latter requirement is aimed at minimising the compliance costs for collecting the GST on these imported goods.

When would this happen?

The Government has yet to release any draft legislation, but the Treasurer’s announcement indicated the new GST arrangements would start from 1 July 2017 (which would match the expected start date for proposed changes to inbound digital supplies), or possibly sooner.

What should overseas suppliers do?

Overseas suppliers who have Australian turnover over A$75,000 or more would need to register for and charge Australian GST (currently 10%, but could rise to say 15%).

For the moment, these suppliers should (if not already) change their sales terms to allow them to “gross up” the purchase price by an additional amount on account of Australian GST. This would align with the usual contractual practice for GST on onshore sales.

Of course, until we see the draft legislation a number of questions will remain unanswered. Some of these are:

  • Will an overseas supplier who sells through a shared platform (e.g. Amazon.com) need to register for Australian GST, or will that privilege fall to Amazon itself?
  • What “supplies” (in GST language) will go towards the AU$75,000 registration threshold?
  • How will an overseas supplier work out the customs value (or “CIF value”) of their goods, in order to charge collect and remit the correct amount of GST?

My 2 cents worth

On the one hand, I hope this change (presuming it goes through) meets the revenue forecast so that the Government can pay for personal and business tax cuts elsewhere. But I doubt it will play out that way.

This move smacks of pandering to big industry players. That is to say, I cannot recall buying anything online in order to save a merely 10-15%, as the savings are usually much higher.

Perhaps worse, this change would do nothing to motivate Australian onshore sellers to improve their game.

Presumably this change, if it is implemented by reducing or removing the low-value importation threshold, would also mean that Australians who travel overseas and return with new purchases might also need to pay GST on those purchases. (For the moment, let’s leave aside the question of whether the goods purchased overseas have become the shopper’s domestic property at the time they are brought into Australia.)

What do you think? Would needing to pay an extra 10% change your buying behaviour?

Australia’s “Netflix” tax

Taxes signpost
Recently the Australian treasurer Joe Hockey announced that the Australian Government is considering extending the Goods and Services Tax to also cover intangible services such as internet streaming (eg Netflix), music downloads (eg iTunes) and e-books (eg Kobo and Amazon) that are sold into Australia. This could make buying online services 10% more expensive.

Generally, no GST is payable on sales other than goods or real property by overseas sellers to Australian to private buyers. But if the Government’s proposed “Netflix tax” becomes law, GST would apply to overseas sellers’ “supplies” of music or video streaming and downloads (or the legit/legal ones, at least!) and other internet-delivered services to Aussie consumers.

Why do this? The Treasurer says that this is an “integrity measure” for Australia’s tax base, and in line with the OECD position that that GST should be charged at the source regardless of where the supplier is based. Other proposals we’ve heard include raising the GST rate (currently 10%) or lowering the low-value threshold for imported goods (currently AU$1,000) but these might be more politically challenging or simply cost too much.

What would this mean?
For consumers – The price you pay for streaming services and downloads could go up by as much as 10%. And while I can’t recall hearing anyone specifically naming Apple’s AppStore or Google Play in this context, I see no reason app sales or even cloud-based services would be excluded.

For off-shore sellers – There would be many practical problems in trying to collect GST from an overseas seller, though arguably this might be easier if you sell through a centralised online middle-man like a Google Play or Apple’s AppStore, or somehow the tax gets collected from the customer directly. But generally as a seller you could be required to remit GST from your sales to Australian customers. So unless you agree to give up 10% of your selling price from Aussie customers you might think about adding a GST “gross-up” clause to your sales contracts, to allow you to collect an additional amount for GST from your customers. As always, consult a lawyer 🙂