Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Hansard source

There is something really wrong here. We are standing here on 14 June discussing a piece of legislation on tax law, the Treasury Laws Amendment (GST Low Value Goods) Bill, which begins on 1 July 2017, just two weeks away. We are in here talking about a tax law which, in two-weeks time, businesses overseas will have to apply. They will have to change their systems in order to implement it. It has not been to the Senate yet. It has not passed the parliament, and it is still due to start on 1 July in two-weeks time. For any piece of legislation, that is extraordinary. But for tax law and something as complex as this for the businesses that will have to implement it, there is just something really wrong about this. This simply should not be happening.

Let us look at what it is. In principle, what this bill does is try to level the playing field so that Australian businesses that sell goods in Australia do not have a tax disadvantage relative to overseas companies that sell goods into Australia. So it attempts to level the playing field. I will talk later about whether that actually works, but its intention is good. We, on this side of the House, have been aware for some time of the growing size of the market of goods coming into Australia and that, eventually, the low-GST threshold would have to be addressed when the cost of collecting it was less than the amount that it cost, because it is quite difficult to collect.

So the intention of this bill is actually quite good, even though the time frame is ridiculous, but one has to ask whether or not it achieves what it sets out to do. What it does, in an operational sense, is this: currently the low-value goods threshold is $1,000, and it lowers that. It is a vendor registration model, so overseas suppliers, including electronic platforms like eBay and Amazon, that re-deliver services into Australia with an Australian turnover of greater than $75,000 in a 12 month period will be required to register and charge GST. It puts the onus on the vendor and it lowers that threshold, so that companies in Australia that are selling to the Australian market do not have a tax disadvantage. Again, this is all good in principle until you start to look at the detail and the extraordinary lack of consultation that there was on this bill, even though it was first put forward in the budget in 2016 over a year ago, the legislation was first introduced in February and it is being debated now, two weeks before its start date. But the level of consultation on this has been minimal, both prior to the presentation of the legislation for the first time in this House and since. Virtually everybody that will have anything to do with this has criticism of it—virtually anyone has criticism of it.

It is as if the government have picked up some of the language of the start-up communities and think that they can apply it to government. The notion of a minimum viable product when you are start-up means that as soon as you have something ready to sell you get it out there—you are still embarrassed—but you get even the minimum viable product out there as fast as possible and you change and improve it as you go. That is the model. The word 'agile' is actually about the sector out there being able to come together and put together new ideas and new solutions and move forward very quickly. But 'minimum viable product' and 'agile' are not necessarily words you would apply to government. Governments need to be able to apply frameworks in which others can be agile. Governments need to provide a level of certainty so that others can work their path through the government policy. This is 'minimum viable tax policy'. It is not finished, it is not ready, it is too early and they are getting it out as quickly as possible. When they have to change it and change it and change it again, through the agility which they think is so great, there are businesses out there that will struggle incredibly hard to try and meet that compliance burden as this government changes its mind, as it gets at its minimum viable tax policy on two-weeks notice. If the government were a start-up, you would be congratulating them for this, but, as a government, this is completely in the wrong space. Governments provide certainty and frameworks so that others can be agile and solve the problems of the world; they do not do this. This is quite absurd.

There are threats to Australian bricks and mortar retailers and to Australian companies online. There are many, many threats at the moment, and one of those threats is the tax discrepancy between the different markets. But the threats are there because there are opportunities in the world at the moment and someone else has stepped into them. It would be foolish for any Australian government or opposition to look at the circumstances that we have now—the rapid growth of the online international goods market, as well as in the service market, and the fragmented supply chains and the growth in international movement of labour through online platforms—and to only be concerned about the threat that is well understood because it threatens existing businesses. And that is what we have here. We have a government that has not considered what this piece of legislation will do to emerging companies in Australia that set up their online sales businesses in Australia and then have a tax discrepancy with businesses elsewhere.

The government is not actually considering the growth of the sector and what the opportunities are. There is no policy for getting Australian businesses online, and we are lagging behind. We have an NBN which is failing dismally and which will not provide businesses with the opportunity that they need to be online in a major way, and we do not see policies and incentives that actually encourage the large numbers of businesses in every one of our communities that are not yet online to get online and compete internationally. The threat that Australian businesses face in this market is an opportunity in every other one, and we are fooling ourselves if we think we can stimulate or even protect growth in Australia without addressing the opportunities that are there and only looking at the threats. As much as that has to be done, it is a very small part of making Australia competitive—a very, very small part—and, unfortunately, it is not particularly competent.

If I look at stakeholders across the board who have criticisms of this measure, they come from every single area: consumer organisations, new businesses and, of course, the businesses themselves that will have to collect the tax.

There was a very good Senate committee inquiry into this that did really great work, and the government senators on that committee also recommended a 12-month delay to this legislation because it is just not feasible that this will be ready for a 1 July start. What they found in that Senate inquiry is that Treasury expects a compliance rate of 25 to 30 per cent in the third year of operation. So, by July 2019, on the current timetable—assuming the government can get it off the ground in two weeks time—we are looking at a 25 to 30 per cent compliance rate in the third year of operation, but only for companies that turn over more than $75,000 in here. On top of that, there will be a whole range of other companies that resell goods that they do not actually have any ownership in, they will be platforms rather than retailers in the conventional sense, and there will be a whole range of models that we have not even thought of yet that will grow in this space. The large warehouse based retailers are not the only model. There will be many, many more that will sit outside of the rules that this rather poorly drafted bill imposes—many more. Even those that we can think of now, the couple of dozen or however many large-scale retailers that sell more than $75,000 a year worth of goods into Australia, will have only a 25 to 30 per cent compliance rate because other jurisdictions, like the US and China, will not enforce the measure on the Taxation Office's behalf. So I assume that compliance will be largely voluntary for overseas operators.

It also means that overseas operators within Australia will face a competitive disadvantage here, because 100 per cent of operators in Australia, even if they do not turn over $75,000 in this market, will be collecting GST. So, if we want Australian businesses to open up here, establish themselves here and compete in the international field, perhaps we need to consider making the tax regime competitive for them as well. They are in many ways the future, and if we want to take advantage of the opportunity that caused the threat to Australian retailers then we need to actually make sure that those that are finding new ways to do it can base themselves in Australia rather than do what this bill sort of incentivises them to do, which is move offshore: move your headquarters offshore and then you will not have the tax disadvantage you will have if you are based in Australia. That part of this bill, that contradiction—that it attempts to improve the competitiveness of Australian businesses but does not actually protect the new ones—is quite alarming.

There have also been a number of submissions from eBay, Alibaba and Etsy, who have all been extremely critical that they would have to collect GST on goods that they simply serve a platform for. As you know, if you buy a good on eBay in Australia, you do not pay GST on it because you are buying it from another person. It is a trading platform, not a conventional retailer, as is Etsy and Alibaba. They are incredibly successful business models, but they do not fit into the old bricks-and-mortar model retailer who is now selling online. They are something else altogether. For them it is hugely problematic because the platforms that they built are quite specific and, according to some of them, these are quite major changes in their platform and they now have two weeks. It is quite extraordinary. We have also heard from some of them that they will geo-block Australia. They will just not sell here. That is also alarming because Australian businesses sell their products through these platforms as well. Again, the businesses that are at the forefront and are using platforms like Etsy, for example, to sell right around the world might find their efforts to get into the international market stifled because of this particular piece of legislation.

Labor wants the government to delay its legislation for 12 months. We do not think that is enough, but we believe the government should do that, and the government's own backbenchers who sat on the Senate committee said that they should. We have heard people opposite saying it is Labor kicking a can down the road. If it is actually a bad can with holes in it that will leak all the way down the road, it is probably a good idea to take it off the road for a while and fix it. I would absolutely prefer that a government gets its tax policy right and does the consultation before it actually imposes it on people who do not have to comply anyway because they are in a jurisdiction where they will not be compelled to do so. If we are going to expect these companies to do it voluntarily, we would want to make it as easy as possible for them.

The delay might seem extreme. The issue is getting greater month by month, but for people like me who were in the copyright industry back in the 90s this has been coming for a long time. In fact, in 1993, 1994 and 1995, US universities had to shut down their servers and ban the downloading of music because 60 per cent of all downloads in the US were music. Napster had 80 million customers by the time the GST was introduced. The online platforms that deal in the sale of labour were well and truly formed in the late 90s and were going gangbusters by the year 2000. I remember when John Howard first introduced the GST. I was sitting around with some of my colleagues in the copyright sector. We thought it would not even be relevant in 10, 15 or 20 years time—that the time for that kind of geographically based tax collection on the sale of goods and services was actually over. Even in 1998, we thought it was over. We were a little early, but the world is changing. The way that goods and services, inputs into manufacture and labour will be traded in the next 10 years requires a comprehensive look to ensure that Australian businesses can benefit from the opportunities created in the world market.

What we do not need is a government whose only focus is on the quickest possible fix of a problem that we have known about for a decade, particularly when their solution disadvantages those who are trying to move into the new world and are trying to break into international markets, and particularly when it disadvantages our consumers and some of our most innovative businesses who are finding new ways to sell to the world. This bill says, 'If you want to do that, move offshore because you get a tax advantage.' I really urge the government to have a serious look at this. This is backward thinking. We really need to engage with the people who work in this field and have serious consultation. Delay it for a year and get it right.

See this speech in context