The Productivity Commission has released a Discussion Paper on Collection Models for GST on Low Value Imported Goods – to assist with its inquiry on this subject – commissioned by the Treasurer on 30 June 2017. The Commission is to report by 31 October 2017 and it has requested submissions from the public by 30 August 2017.
The Treasurer’s terms of reference noted:
” Historically, GST has not applied to the supply of low value imported goods, creating an uneven playing field. … Legislation has been passed (the Treasury Laws Amendment (GST Low Value Goods) Act 2017) that will collect GST on low value imported goods from 1 July 2018. The legislation uses a vendor collection model, whereby vendors (including suppliers and online marketplaces) will collect the GST on low value imported goods at the time of sale.”
The discussion paper notes:
“In mid-2015, COAG agreed to extend the GST to cross-border supplies of low value goods, and in 2017 the Australian Government introduced a Treasury Laws Amendment (GST Low Value Goods) Bill 2017. The bill retained the [Low Value Threshold] at $1000 but provided for a new system for imported goods that fall under that threshold. It places the onus on foreign vendors, as well as redelivers and electronic distribution platforms (EDPs), to collect and remit GST on those goods (see section 2). These new measures were also to commence on 1 July 2017.
The bill was subsequently referred to the Senate Economics Legislation Committee, and then passed into legislation in June 2017 with two amendments. These were to delay by one year the commencement of the new measures, and that there be a Productivity Commission inquiry on the matter.“
This is the inquiry referred to in these amendments.
The discussion paper also makes the point that this inquiry relates to importation of physical goods and NOT the cross-border acquisition of ‘digital’ products – which has been the subject of separate legislation that took effect on 1 July 2017. The legislation was the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016 (which received Royal Assent on 5.5.2016).
The inquiry’s terms of reference require the Commission to consider:
- the effectiveness of the new measures;
- whether models for collecting GST in relation to offshore supplies of low value goods other than the new measures might be suitable (including evaluation of the effects of the models on Australian small businesses and consumers);
- any other aspect relevant to the implementation of the new measures.
The Commission is required to make recommendations on all three matters.
In the Discussion Paper, the Commission makes the following comments about the ‘high level’ summary of the different possible collection models and its preliminary views about which of these it will concentrate on.
“The terms of reference require assessments of the effectiveness of the legislated measures and the suitability of alternative collection models.
“Given the background to the inquiry and the limited time available, the Commission intends to narrow the range of alternatives it assesses in detail.
“To this end, the Commission has undertaken an initial, high-level, examination of several models. These include two specific models canvassed in recent Australian reviews — an extension of the current Australian border model, and the hybrid model put forward by the Low Value Parcel Processing Taskforce — and the other broad classes of collection model identified by the OECD.
“Taking into account the considerable body of previous work by the OECD, the Commission and the Parcel Processing Taskforce, and information presented in the recent Senate inquiry, the Commission’s view is that:
- only hybrid or multilayered models such as that proposed by the Parcel Processing Taskforce are potentially suitable alternatives to the legislated model.
- ‘purer’ models, such as the border, purchaser, financial intermediary and transporter models, all have significant limitations as stand-alone models.
- hybrid or multilayered models that rely on purchasers or financial intermediaries for GST collection are also unlikely to be effective, while those that result in the need to process and store a significant number of items at the border are unlikely to be efficient.
“Further detail on alternative models and their key features as they relate to suitability in an Australian context are discussed below.
“Unless compelling evidence favouring other models or approaches is forthcoming in submissions and/or at hearings, the Commission intends to focus in its final report on the model proposed by the Parcel Processing Taskforce, together with the legislated model, and any workable proposals to improve these models.