Australia hints at action on parcel GST

TOM PULLAR-STRECKER
Last updated 05:00 05/12/2012

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The net appears to be slowly closing on tax-free online shopping.

The Australian Government has rejected calls to immediately cut the A$1000 (NZ$1269) threshhold under which Australians can buy goods from overseas retailers free of GST and duty, but it signalled that was far from the end of the matter.

PwC New Zealand partner Eugen Trombitas said the Australian statement would be closely watched by the New Zealand Government. Its suggestion of future action would encourage Kiwi retailers who also claim they are unfairly disadvantaged by consumers shopping tax-free from overseas websites, he said.

In New Zealand, the threshold above which consumers should pay tax on overseas purchases ranges between $240 and $400, depending on whether the item is one that is subject to duty. However, reports suggest the collection of such taxes is hit and miss.

Australian assistant treasurer David Bradbury said the Australian threshold was one of the highest in the world and that "on the basis of fairness and tax neutrality" Australian retailers should not be disadvantaged by taxation arrangements that favoured overseas retailers.

However, Bradbury said it would not be cost-effective to lower the threshold now, before significantly improving the processes needed to collect tax on the estimated 58 million parcels that enter Australia and fall under the threshold each year.

"The Government has rejected calls for an immediate reduction in the threshold, but would begin preparing business cases and possible implementation plans for reforms to low value parcel processing," he said.

"Without greater efficiencies in the system, the cost to taxpayers of collecting the GST on low value parcels would outstrip the revenue that is collected."

Trombitas said any solution that allowed tax to be collected on such items would need to be "technology based".

A report published by Australia's Low Value Parcel Processing Taskforce, considered by Bradbury, said a "co-ordinated global effort was gathering pace to better capture and use data in the international mail environment, driven by a confluence of security concerns and commercial imperatives".

Bradbury said a final response to the Low Value Parcel Processing Taskforce report would be published next year.

He added that tax-free international shopping was "not the biggest challenge confronting the retail sector".

Purchases from overseas online retailers accounted for less than 1.5 per cent of total Australian retail sales, he said.

Australia's review of its GST threshold came as it and cash-strapped governments in Europe also sought to clamp down on corporation tax avoidance by multinationals, principally those selling digital goods.

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New Zealand Revenue Minister Peter Dunne told BusinessDay last week that he had asked for an urgent report on tax avoidance by multinationals after Labour said companies such as Facebook were making fools of the Government and accused him of inaction.

The Italian government last week accused Google of failing to declare € 240 million of income in Italy.

The Italian finance ministry said Google Italy had a contract with Google in the United States and with Google Ireland "pretending that Google Italy only had an auxiliary role, which was not at all reflected in the facts", Britain's Telegraph reported.

Google has denied the accusation.

Commenting on the tax issue, Italian parliamentarian Stefano Graziano said the "deep economic crisis demands greater force and determination", the Telegraph reported.

- © Fairfax NZ News

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