Michael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | Hansard source

I thank all members for their contributions to this debate, including the member for Kennedy. I want to give a shout out to the member for Maranoa too for being here in the chamber. Thank you for being here and making your contribution.

This bill amends the goods and services tax law to apply GST to goods imported by consumers valued at $1,000 or less. With this bill the government is levelling the playing field for Australian businesses. We are removing the loopholes in the tax system that we inherited so that we force foreign multinationals to remit tax to Australia on Australian sales. Under the current law, GST does not imply to the supply of low value imported goods, which self-evidently creates an unlevel playing field. The government is absolutely committed to stopping this unfair and distortionary benefit enjoyed by foreign sellers, and in the process strengthening the integrity and fairness of our tax system.

The state and territories, I note, unanimously support this bill. We reached agreement back in August 2005 at the Council on Federal Financial Relations meeting. They chose to adopt this model—the vendor collection model. Earlier this year all state and territory governments formally wrote to the Treasurer signing off on the policy reflected in the bill. Under the vendor collection model, vendors of offshore goods with an Australian GST turnover of $75,000 or more will be required to register for, collect and remit GST on goods valued at $1,000 or less that they supply to consumers in Australia, just like any Australian seller has to do. This measure will also apply to online marketplaces, also known as electronic distribution platforms. It is essential for the success of this measure that it applies to these types of entities, since they facilitate the majority of low-value imported goods sales in Australia.

Obvious to everyone is the fact that we live in an increasingly globalised world, where online cross-water shopping is now the norm and low value imports will continue to rise. Collecting GST at the border, as we currently do for goods over $1,000, is too costly and inefficient for the tens of millions of low-value parcels that come into Australia each year. Indeed, in 2011 the Productivity Commission estimated that applying GST to goods worth $20 or more at the border would raise $550 million but, perversely, cost over $2 billion to implement and administer. Further, goods would be physically stopped at the border, causing lengthy delays and creating bottlenecks. That is obviously not good for consumers, taxpayers or our economy.

Another alternative considered was the logistics model, whereby transport companies would charge and collect GST. This model could provide a high level of coverage, but it would be very expensive to implement. Transport intermediaries would be required to gather additional data on the taxable or exempt nature of goods, as well as the consumer or business status of the importer, and then calculate the GST. Currently, transporters are removed from the point of sale and do not have complete information to assess the GST payable in that way. High costs are also involved with system changes and storage of the goods at the border if the GST is not being paid by the importer. Adopting this model could mean creating bottlenecks at the border, and Australian consumers may be charged additional handling fees. Again, such a model would not be good for consumers, taxpayers or our economy more broadly.

We also considered the financial intermediary model, which requires financial intermediaries to charge and remit the GST on low-value goods sales that they process. Again, this model was ruled out because financial intermediaries would find it difficult to determine if the transaction involves goods that attract GST and whether a good purchased from overseas would eventually enter Australia. This model would also require reform of international payments system mechanisms, which is really beyond the power of any single jurisdiction such as Australia to mandate. We cannot burden our domestic businesses with the current inequitable arrangements while we wait for the technology to catch up. Another review will not deliver new information and will only delay reform by at least another two years. We must act now.

Other jurisdictions are already taking action, and they are focusing on taxation of goods by the vendor at the point of sale. This is why, from 1 January 2018, Switzerland, for example, will be requiring vendors to collect GST, or VAT, on low-value imports. Within the European Union, vendors are already required to charge and collect VAT on sales within the EU. The OECD and the EU also recognised, in recent reports, that there can be no substantive reform without a key focus on taxation of goods by the supplier at the point of sale. The vendor collection model is already being used by other countries to collect a GST on cross-border digital products and services. This includes Japan, South Korea, New Zealand, member states of the EU—Switzerland and Norway—South Africa and now Australia.

In this new world of increasing cross-border online trade, we need to take action so that Australian businesses and jobs are not left behind. This bill fulfils that objective. It will level the playing field for Australian businesses to compete with overseas retailers and, importantly, protect the integrity of the GST base. I commend this bill to the House.

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