Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Hansard source

I am pleased to make a few comments regarding the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016 and this important reform. Other speakers and the shadow Assistant Treasurer have outlined that Labor is reserving its position on this bill until the Senate Economics Legislation Committee has conducted an inquiry into the operation of the bill and heard the views of Australians regarding how this bill will operate.

I do understand the need to ensure that our tax system keeps pace with technological development and its effect on commercial transactions. There is no doubt that particularly over the last decade there has been a large increase in the number of Australians purchasing goods and services from offshore suppliers over the internet and the value of those purchased goods and services. The effect of this has been to shrink the Australian tax base and to leave locally based suppliers at a competitive disadvantage compared with those foreign suppliers. When the GST was first implemented in the late 1990s we did not see the volumes of purchases being made over the internet, and the decision was made that the GST would not be charged on certain purchases from foreign suppliers made under those circumstances. Those circumstances of course have changed. There are now a large number of transactions done on a daily basis over the internet from between Australians and foreign suppliers of intangible goods, such as, in particular, music, videos and the like.

The intent of this bill is to modernise our tax system to ensure that those digital products and intangible goods and services supplied to Australian consumers by overseas businesses are subject to GST, as Australian based businesses are. In principle, that is a noble objective. We do not want to see Australian businesses at a competitive disadvantage compared with foreign businesses, and I support the concept of extending those taxation arrangements to ensure that we do level the playing field. The issue I have with this bill is how you do it. I have had a good look at the explanatory memorandum, and I am somewhat confused about how these provisions are going to operate and, importantly, how they are going to be enforced

The bill is to take effect from 1 July 2017 next year. The amendments are modelled on the European Union rules regarding the supply of digital goods. A number of other nations have taken up this challenge of looking at how you charge consumption taxes on goods that are purchased from foreign suppliers over the internet and the like and have made some amendments. I am not au fait with the ways other nations have done it, but I have read the explanatory memorandum in the case of this bill and it is still not clear to me how this bill will operate in practice—in particular, how the government will collect the GST from foreign suppliers and, importantly, how they will enforce the measures contained in the bill if a foreign supplier just simply refuses to collect and remit the GST to Australia.

The explanatory memorandum makes all suppliers of things other than goods or real property connected with the indirect tax zone where they are made to an Australian consumer. This amendment will make that connection with Australia for the purposes of GST. It means that a supplier of digital products, such as streaming or downloading of music, movies, apps, games et cetera, and, indeed, consultancy and professional services, will be subject to the goods and services tax if they are supplied by a foreign supplier. That sounds fair in theory and it sounds achievable in theory but the issue for me is how you do it in practice. Reading the explanatory memorandum, it appears there are two ways this will occur. One way is that it will be the responsibility of the operator of an electronic distribution platform, if that operator controls the authorising of billing, the authorising of delivery of supply and the setting of the terms and conditions under the supply.

That is somewhat confusing in itself; indeed, there are many operators of these electronic platforms that are supplying goods into Australia that do not operate within Australia and operate offshore, and it is not clear how they are caught by these provisions. The second manner in which I understand a supplier will be caught by the GST obligation if they are supplying goods and services from overseas is based on whether or not the Australian consumer is registered for GST and whether or not the supplier believes, and has taken reasonable steps to obtain information concerning whether, the recipient of the supply is an Australian consumer. Examples that are given in the explanatory memorandum highlight how some of the confusion around this particular provision could come about. I take it that this would be a rare example, but we are given the example of an Australian dual citizen who may be in London at the time that they make a purchase of, say, an app or particular music over the internet. They use their London address but an Australia credit card. It is not exactly clear whether or not the supplier is then liable to charge GST and remit that to the Australian government.

These, no doubt, are issues that will have to be resolved in the course of the operation of this bill, most notably, probably, by the tax commissioner, but in my view they are confusing. I think this is why this particular bill should be the subject of an inquiry by the Senate Standing Committee on Economics to tease out all of the issues about how the particular provisions are going to work and, importantly, whether or not the operation of the scheme and the enforcement of the scheme is going to cost more than the actual revenue that is going to be raised by this scheme being put in place. This is an issue that has been highlighted in the past. The former Assistant Treasurer in the former government, David Bradbury, did a lot of work on this and used the inquiry and the report of the Productivity Commission, which highlighted this exact issue. The Productivity Commission reached the conclusion that the change of extending the GST to the provision of goods and services from international suppliers below $1,000 was not worth it, because the cost of the operation of the scheme and the enforcement of the scheme would be much greater than the actual revenue that would be raised for the government.

This is a key point, particularly when we have a tight budget scenario at the moment. It is something that I think needs to be teased out by the Senate economics committee: will the difficulties with the operation of this scheme and the costs associated with it outweigh the revenue that will be raised?

When the government came to office in September 2013, they promised a white paper on tax reform for Australia, and they promised that within two years. It is now almost three years, and we still do not have the white paper. The former Prime Minister, Tony Abbott, promised the most comprehensive review of Australia's taxes to ensure that there was fairness and said that they would be—in their words—looking at lowering taxes for Australians. That was almost three years ago, so this is another broken commitment from the Liberal-Nationals government. They promised the white paper within two years, and we are yet to receive it.

There is now beginning to be some doubt about whether or not that white paper will ever be delivered by the government. They are now saying that they will do some sort of statement in the lead-up to the budget about tax reform and that the major elements of their tax reform package will be contained in the budget. There is even confusion now about whether or not this white paper will be delivered. They have floated these ideas about increasing the GST, and there is no doubt that the Prime Minister gave the Treasurer the obligation to go out and look at increasing the GST, to get the business community to get out there and support this campaign and to get the various state Liberal premiers to get out there and do the same, and they did. And then they dumped it for no apparent reason and left all of those people in the lurch.

Obviously, as Labor members of parliament, we support the dumping of an increase in the GST because it would have been unfair, and it would have been a handbrake on economic growth in our economy, in my view. But it is a great symbol of the chaos and dysfunction of this government when it comes to developing a plan for tax reform that is needed within Australia. We saw the Treasurer over the last couple of weeks, after he dumped the GST, then begin to talk about negative gearing. He mentioned—they are his words—'the excesses of negative gearing' as something that his government would look at targeting through its tax reform package. It now appears that that has been dumped as well.

Two major tax policy reforms that were floated by the Liberal Party—it was not us who put these on the agenda; they were floated by the Liberal Party—were dumped in a matter of moments. Some would say it is because the former Prime Minister, Tony Abbott, has begun to agitate on these issues and has begun to stir up the pot about it within the Liberal Party caucus and get people onto his side for his comeback to the prime ministership, and that has meant that Malcolm Turnbull, the current Prime Minister, has become timid on tax reform and unable to make a decision—while the Australian people suffer the whole time.

And now today we have this utter embarrassment for the Treasurer. It proves what a joke this Treasurer has become, when he goes out there and starts spruiking a BIS Shrapnel report done on negative gearing in Australia. In his words, it is 'an indictment on Labor's policy' and shows that 'they just haven't done their homework'. It appears that the person who has not done his homework is the Treasurer. It appears that the Treasurer never even read the report. If he did read the report, what an embarrassment, because he does not know the value of the Australian economy. On the first page of the report, it says that the value of the Australian economy—our GDP, if you like—is $190 billion. That is actually the GDP of New Zealand, one of Australia's nearest neighbours. Here we have the Treasurer of this nation, and he does not even know the value of the Australian economy. What an embarrassment! The study was also released before Christmas, and the authors of the study have today admitted that it was not a study of Labor's recently announced negative-gearing policy at all; it was done before this policy was announced.

So, firstly, the Treasurer does not know the value of the Australian economy. Secondly, the report is discredited because it gets severely wrong the value of the Australian economy, one of the key assumptions in the report that underlies the findings that were made in respect of negative gearing. Thirdly, the report was done before Labor even released its policy on negative gearing. So how can this Treasurer claim that it is 'an indictment on Labor's policy'? All it is is an indictment of his performance as the nation's Treasurer and the fact that he cannot even get these fundamentals of the Australian economy right.

This is the reason the Prime Minister, it appears, has taken the issue of tax reform away from the Treasurer completely. The major part of the Treasurer's portfolio has been taken away from him and given to the head of the Department of the Prime Minister and Cabinet. This proves that the Treasurer is just not up to it when it comes to tax reform. He is not up to it when it comes to managing our economy. More dastardly and more importantly, the division and chaos and dysfunction of this government is actually harming the Australian economy.

That is why the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016, in respect of the GST, needs to be inquired into by a Senate inquiry before this parliament makes a decision on it.

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