Australian Online Sales Could Be Subject To GST Under New Proposal

An OECD proposal would see a flat tax applied to low-cost consumer sales made online.

Image modified from Shutterstock This story originally appeared on Lifehacker

The Age reports on the OECD report, which suggests that overseas suppliers should be required to register for sales taxes in countries where they ship goods as the "most effective" way to tax those sales.

Rather predictably, Gerry Harvey has his piece to say in the Age report, as he's a fan of the proposal, calling the current state of the play with GST, where sales under $1,000 are GST exempt, a "rort". Other local retailers are in favour of the move, although as we've seen previously, the pricing picture for local goods often has larger problems than just GST inclusion.

The OECD discussion paper is out for consultation until February, and as the Age notes, any changes to GST would need the full support of all states to pass into Australian law. [via The Age]


Comments

    Will the Australian government require overseas suppliers to collect tax in their country and to then forward the money (at their expense) to it?

    The governments of this world would be better off getting all companies paying the tax those companies are supposed to rather than allowing them to "illegally" off-shore money through places like Luxembourg.

      Update: The government that promised "no new taxes" is instead considering extending the GST to include fresh food, education, health care... - of course offset by income tax cuts that mainly benefit the very wealthy.

      And I guess they'll get to use their weasel words again: "its not a new tax but a change to an existing one".

    Getting overseas sellers to register for tax in another country? hah

      Unfortunately for the buyers, the predictable "fix" is that customs instruct Australia Post or the courier to hold on to the goods until the sales tax is paid on the items.

      A few angry customers later, suddenly there is a rush to register with the scheme.

      Or a lot of sellers stop selling to Australian customers.

      Either way the consumer loses.

        If someone has to hold items to collect the tax, its going to be more than GST being added - handling and admin costs will be thrown on as well.

        I think a lot of sellers will just stop selling to Australia.

          Previous assessments have found exactly this: the cost of implementation would be greater than the gains from the taxation. The tax would basically exist only for protectionist reasons (initially, at least).
          If the outcome was that people started buying more things locally because the gap in price was smaller between overseas and local, then the tax would become more efficient.

          If it were not so inefficient, then I wouldn't be any more adverse to having a GST on purchases from overseas than I am adverse to a GST overall.

        storage isn't free.. that's more people needed to be employed, bigger warehouses to store stock and alot of man power to police every item coming into the country.. what, for a lousy 10%.. the maths have been done before.. it'll cost more than the return so it's just not viable unless they charge 25% or some shit.. which i hope doesn't happen.

          Simply not true. No one said they have to police every item. They don't police every item today. Do random checks and if a seller has 3 strikes, smack them with a fine. No one polices every retail store in Australia today, I don't see why being online someone needs to police everything.

            smack foreign sellers with a fine under Australian law? yeah, good luck with that.

        That is how it works in Canada. All items over $40 even if labeled as a gift are taxed at the Provence's sales tax rate(every Provence in Canada has a different sales tax rate). The post office will hold you item and put a slip in your letter box. When you go pick up your package you pay the sales tax and a service fee. Most of the post offices in Vancouver and Montreal where i lived, were open 6 days a week 7am till 7-9pm depending on the suburb, So you had plenty to time to pick it up.

        Fedex/DHL/UPS charge incredibly high fees to "broker" the import tax for you so hardly anyone I knew used them.

    10% tax when you are saving 50 to 500% per item is not going to make any difference what so ever.

      ... and even less people will shop with retailers out of spite.

      Thanks to Mr Harvey, I used to be a frequent Harvey Norman customer, but now id rather support anyone else but.

      This constant whinging can't be good for the business.

        The fact that you used to be a frequent Harvey Norman customer just shows you don't shop around much LOL. It also shows why you get a large discount from buying online :O)

      Exactly, i'll happily pay 10-20% more for a local purchase but 200+%... not a chance.

    So does Mr Harvey want 10% added to the good he imports as well?

    Or is it just for us mugs who purchase at retail?

      Commercial importers are probably already paying a duty on larger volume/value imports though arent they?

    GERRY HARVEY and his HARVEY NORMAN can go suck a big fat one!

    I not longer shop at his stores, why?

    i was there, found what i wanted, fair enough, it was more expensive than online, but it was there, and ready to buy.
    i had cash in my hand.

    instead of the sales person coming to me, i was about 2 meters away, literatly WAVING cash, he was more intrested in talking to his mate about how drunk he got the previous night, and what happened with some girl.

    needless to say, i spoke to the manager, and while he went looking for the sales person, he was still chatting to his mate. I bought my phone online, cheaper, took a week to get here, but no longer will i go to his stores

      Only time I have shopped there recently is because the item I wanted was in a shop that I refuse to shop at. I sales guy said he couldn't lower the price so I mentioned there price with a little discount added and he matched it.

      Other time was because we could get vouchers with our credit card points and buy the product at HN. We worked out that was cheaper (points wise) than getting the actual product with the points.

    The Australian government and people like Harvey need to pull their heads out of it's own arses. There are more people in the greater Manhattan area then the entire country of Australia. Have a wild guess what will happen if they try and push the responsibility at overseas retailers... yup, they just stop shipping to Australia.

    Then Australian customers will simply use services that re-ship products sent to a local address in the US. Those package are now declared as gifts. GST problem solved.

    Last edited 03/01/15 4:37 pm

    Dear Australian government, how exactly am I costing you potential tax dollars by importing things that are not sold in Australia in the first place?

    Also, stores stopping their shipping to Australia wont help, as people will just use shipping services, and the prices for some things will STILL be less than the cost in Australia.

      I think you'll find that if a product is genuinely not sold in Australia then you can get it into the country GST free. We brought a machine from France for work a few years ago that isn't sold in Australia at all ( as far as I can work out it is still the only one in the country) and we were able to get it in GST free.

    This coming from Gerry "Why Would You Help the Poor and Homeless" Harvey? Big surprise there. News flash idiots - the Productivity Commission already canvased this idea. They said the collection fees required to obtain the GST would be MASSIVELY higher than the revenue raised. Something to the effect of $2 BILLION in costs to collect roughly $500 Million in revenue.

    No matter how they approach this, we the consumers will be worse off - guaranteed. Either online sellers will stop shipping products to Australia, in which case you have to use freight forwarding services that cost $50 at a minimum (and will likely still have to pay import duty) or we'll be forced to pay the GST collection fee ourselves at the Post Office - no more home deliveries. Can't wait to see how long the queues are in the local Post Offices if that comes into effect. And there is no "Gift" loophole anymore. I think it was the Rudd government that got rid of that (not that we needed it with the $1000 Threshold), but if that's the case you can bet these blood-sucking bastards won't reinstate it.

    I fail to see why it's suddenly our responsibility to prop up a failing business model. If they can't compete that's their problem. I have the right as a consumer to find the best price available. If that isn't to be found in Australia, that's the fault of the retailers, not mine.

      Yeah, Im not sure why they keep trying to get this through when the studies have already shown its not viable, its almost like that "very fast train" episode of Utopia TV show, but in this case its the masses that dont want it. https://www.youtube.com/watch?v=3jl9hTIkXXc

        Because the studies are done by a bunch of morons. You don't need to monitor everything that comes in. Just like everything else, it would be done as random checks. No one goes and monitors every business in Australia today to ensure they pay GST, the same goes for online. Just slap them with penalties if they don't comply.

          Yeah but these are overseas companies (or sole traders), so how do you go about slapping them?? Are the local regulators here going to be hopping on a plane to china to ensure a fine is paid when some ebayer doesn't charge the sales tax and remit it back to Aust tax dept?

          So then perhaps you fine the buyer?? But how would that be at all fair if they have no idea if the seller is charging/remitting GST?

          This can really only be done if institutions controlling the funds transfers have something in place to monitor it, I know that Clickbank already adds sales tax for certain US states and europe, but thats for virtual goods and I think it would cause issues for those doing business via Paypal which works somewhat differently (ie, you can send funds to other paypal users without having to purchase something).

    So companies who do not operate in Australia get away without paying taxes, while those who do, including the small home run business, are slugged with the tax?

    And this is fair..... How?

      Companies operating within Australia selling to the US are not collecting US sales tax. How is that fair?

        I know you’ll never read this because you’re too cowardly to sign in an have your comments tested, however I will post this to stop your misinformation.

        No one sending goods to the US pay taxes. The duty fees are paid by the person receiving the goods. That is how the American tax system works.

        When you work in Australia, your boss takes a portion of your pay and gives it to the government for you. It is called Pay As You Go. In the US this doesn't happen. You get your pay and then have to keep some aside to pay your taxes after you have been assessed. See? Different.

        Imports in the US are different too. If you buy something from out side the country, the company you buy it from has to add an estimate of the value of the goods on the address label. USCBP charges you a fee based on this value starting at a minimum of $2 - $9 for letter sized items to $25 - $485 for parcels. On top of this you then have to pay state and local import taxes depending on where you live.

          You are incorrect on the 'you have to keep some aside to pay your taxes after you have been assessed" statement. It's similar to the way it's done in Australia, every pay period, there is an estimate of how much tax you have to pay and the company takes that out of your total pay, then at the end of the tax year, the real amount of tax you had to have paid based on your earnings for the year is figured out and you get a refund if you paid more, or you have to send the IRS money if you paid less. In some instances you may be able to just get paid all of your money and pay all of your taxes at the end of the tax year but they are not the norm.

      Home run businesses are not fair because you do not have to rent shop space. Give a thought for Woolworths. Imagine how much it costs to rent/buy/build all there stores while you get a free ride. Disgusting.

        Yes, down with small businesses.....! I know someone who runs a small accessories business out of her home and conducts most of her business online or going to the local markets (which doesn't cost much if anything to set up a stall). I should tell her to eat into her very small margins as you think someone who doesn't rent or own a space to conduct business is getting a free ride.

        Thanks internet commenter!

          Wraith, meet sarcasm.
          http://en.wikipedia.org/wiki/Sarcasm

    And the public response to being forced to pay more should be;
    1) Boycott Harvey Norman (actually, do this anyway to punish Harvey for pushing this all the time)
    2) Obliterate the Abbot government at the next election.
    Do this at your electoral peril Tony.

    Hey Gerry!.. You know I window shop at your stores, then buy elsewhere online for less right?

    GST is not the problem. The Australia tax is the problem.

    The Australia tax is the problem is local large retail outlets selling products for considerably higher than they are elsewhere. e.g. i was looking at a MSI laptop it costs $1650 US. Here in Australia its over $3000 for the EXACT same model.

    The other problem you have is harvey norman and the likes have a sort of monopoly in that they can bully smaller competition by having sales that under the cost of that smaller shop. But that is how quanity works...

    If it were a level playing field that anyone anywhere in the country could buy for the same price regardless of volume you would see places like harvey go out of buisness and smaller places do well due to the better customer service.

    So Gerry a quick fix for stores and for other large retailers
    1. Stop selling crap. (ie poor quality overheating laptops)
    2. pay your employees properly. (enforce a franchise condition)
    3. charge FAIR prices so over the top. e.g. a 30% premium over the O/S price would be fair.
    4. Stop selling something as buisness when it is not a buisness product!! e.g. consumer laptops with windows HOME version when they should be Windows Professional!
    5. stop selling the crappy "complete office" over microsoft office.

    I understand they need more dough in the reserve bank... but come on...

    Kick and scream all you like Gerry.

    Consumers are becoming more savvy in an ever increasingly tight economic environment and your profits are sliding because you can't be price competitive and our government salivating over another way to tax us... Yeah, no thanks.
    I feel we pay enough for living in Australia as it is.

    Costs of living are ever increasing, housing is becoming unaffordable to the younger generation, wages aren't coming up as fast (or at all) and we cop a hefty Australia tax on top of anything we want to buy locally - especially from the big companies as were highlighted in the IT Pricing Inquiry that didn't really accomplish much.

    It's not just younger tech savvy consumers who look to overseas purchases at lower prices to save money - mums & dads, grandparents - even my young nephews search online globally for the cheapest price.

    I think there'd be quite the uproar if this was pushed through - and even if does, it'll be a shemozzle. Besides, I dare say we'll find another way to work around it. Are they going to tax purchases I made overseas while travelling when I come back to Australia too?

    In one way I acknowledge that importing and running business in Australia is higher due to our location and lower relative population size - and I definitely feel for small businesses who can't compete with the bigger national chains. (e.g. How many local milkbars are around these days?)

    Gerry Harvey did his part to squash out smaller competitors who couldn't consistently match/beat his pricing given his scale and now the same thing is happening to him and other large chains given our easy access to global retailers. Boo hoo.

      Additionally, tax on import seems to apply for US/UK residents in the same/similar fashion to what is being proposed here but I still think our government will make an absolute mess of implementing it here. (References below)

      https://help.cbp.gov/app/answers/detail/a_id/810/kw/incoming%20parcel%20tax/session/L3RpbWUvMTQyMDQxMjEyMi9zaWQvU3hBVDVFYm0=

      http://www.ebay.com.au/gds/UK-Buying-USA-Import-VAT-Customs-Duty-Parcel-Force-Fees-/10000000013589137/g.html

      https://www.gov.uk/goods-sent-from-abroad/overview

      So basically, save up, go overseas on holidays (or give cash to a travelling friend/family member like the old days), buy in/from a low tax state then have it all sent back as 'personal belongings.'

    I really can't wait for retail to die. When I can ship a SINGLE UNIT of a product and pay individual shipping costs and still have it cost about half the price of the retail price here, without access to the retailer's bulk shipping savings... something has gone horribly fucking wrong. There are too many hands dipping in the cookie jar, and they all need to fuck right off.

    Buy overseas? Our crappy aussie dollar has killed off that idea. When you see how much overseas equipment Aussie companies use on a daily basis there has to be a strong argument against screwing our dollar to increase exports. We're not all farmers and miners and even they buy equipment from oveseas. So now the government want to isolate us even further and make us even less competitive in a global marketplace?

    The way things are at the moment, I don't think anyone's going to be buying anything from overseas anyway. Aussie $ has tanked against all the major currencies, except the Yen.

      Had a look online last night. Ran through a currency convertor.
      "Damn that's cheap, I should buy it".

    Yeah, generally I'm not a fan of extending the GST to online purchases under $1000. I like my cheap stuff cheap online.

    However...

    If you've been paying attention to the news in the recent weeks and months there has been rumours and rumblings that the govt is looking into either broadening the GST base or increasing the rate above 10%. Very worrying indeed. Just today a federal LNP MP has come out on the public record to express his support for the govt to broaden the GST base by including previously exempt items such as fresh food, health and education.

    Now if the govt decides to broaden the base I'd rather see fresh food, health, education and financial advice remain exempt and see sub-$1000 online purchases be taxed instead. I think this option is politically more palatable for the electorate. It probably wouldn't raise as much money as a 10% GST on fresh food, health and education separately, and but I'd prefer that option than see it go the other way.

    Last edited 05/01/15 1:28 pm

    & what about 'gifts' from overseas, will I have to pay 10% get in order to receive them? Could make birthdays/xmas expensive for me because my family all live overseas. :(

      You could just ask them to send money instead. Of course you'll need to inform them to send between 50-400% more to cancel out the Australia Tax.

    it's not the consumers fault that the local market is not priced comparatively. why should we pay an additional tax simply because the local market cannot price the product lower than a competing overseas market.

    The government should either lift GST on all products below $1000 or tax everyone equally, I am not sure why Australian businesses who employ Australians should be punished while overseas companies that employ overseas people should be rewarded by being able to sell to Australians for less.

    If you want to live locally, then you need to work locally, which means you also need to buy locally. Jobs are created by people spending within the economy that they are employed in.

    Lets stop punishing people who wish to invest in Australia, either lift the GST for all products below $1000 for everyone, or just tax everyone equally. You could possibly even argue that products coming from overseas retailers into Australia should be taxed more, Australia is a great place to live because we have a high standard of living which is funded by higher salaries than the rest of the world. This translates to higher costs also.

    You can't have your cake and eat it too.

      Even if collecting the tax wil cost 4x what it will raise?
      Also bear in mind that 10% will not stop peoples buying habits, as others have said I will also pay more to buy locally but not 50% and upward, some of the stuff I have purchased over seas has been 1/10 of the cost locally.
      Also most "local" purchases have to be onlin as I live in a smaller city, shipping cost in Australia is appalling compared to overseas and delivery times are similar.

      AMEN. Giving everyone a fair go is all that they ask. Bit hard to do business when your arm is tied behind your back, meaning other people are importing your items and selling at a fraction of the cost because they sell them out of their garage and nothing can be done about it. Then you have big business who want to be the king ie Woolworths and Coles so they slash prices against each other not realising the harm they are doing to their own suppliers but also small business who cant get those prices. Bunnings is another example. If you are not getting screwed by Big Business, then you are getting screwed by people who either import your product or overseas business that ship to you. How is business supposed to be competitive when they have no way to be competitive.

      Last edited 06/01/15 3:15 pm

        If someone can import your items from overseas and sell them cheaper than you, something is very wrong.
        So you make something for $200 and sell it to people. Some of it somehow ends up overseas in your scenario. Then I import it and sell for $100, undercutting you. How does that work? Who is giving away your product?

    for everyone who thinks its unlikely overseas companies will register for GST dont forget this includes companies like Kogan who pretend to be based in Hong Kong for tax purposes while pretending to be Australian and never paying GST.

      The same for Becextech too. I got burned, thinking i could claim the GST back at the airport, then found out there was none as the item came from HK.

    I think let them do it. I assume this law will be for all Importers (and if not why?) so all them nice brick and mortar stores will have to markup their prices by 10% as well or as Harvey Norman would do 20+%. So who is really going to be losing out?

      Ummm, did you not read the article? It currently applies to purchases under $1000. Do you really think HN buys all their stock in single separate transactions for every item?

Join the discussion!

Trending Stories Right Now