Plan for GST on all overseas purchases 'fails to understand online markets'

Gareth Hutchens
Chief executive of startup says government’s online GST plan may make small business exports less competitive by encouraging retaliatory action from abroad. Photograph: John Stillwell/PA

The Turnbull government’s plan to charge GST on all online purchases shows a “fundamental” lack of understanding about how online markets work, a local startup has warned.

Gary Elphick, the chief executive of Sydney-based company Disrupt Sports, says the government’s plan may also make Australia’s small business exports less competitive by encouraging retaliatory action from foreign governments.

The treasurer, Scott Morrison, is pushing ahead with plans to abolish the GST concession for low-value goods bought online from overseas. At the moment, imports of goods worth less than $1,000 are GST-free – including clothing, books, electronic devices and sports equipment.

The Turnbull government is considering removing the concession to help “level the playing field” for Australian bricks-and-mortar stores after years of lobbying from retailers such as Gerry Harvey.

But the cost of collecting the GST on goods purchased online is estimated at $60 a transaction. With a GST of 10%, that means the government would lose money on transactions worth less than $600 – the average value of internet purchases is about $100.

Under the plan, the government also wants online giants such as Amazon and eBay to collect GST for the commonwealth. That “vendor model” has been heavily criticised by the websites, with eBay.com.au warning the bill unfairly targets third-party marketplaces with a presence in Australia.

“Other dotcom sellers who do not have a presence in Australia will largely ignore the legislation because there is no practical way to enforce it,” eBay reportedly says in its submission to a Senate inquiry.

“Ultimately if the government proceeds with the bill in its current form, a marketplace may take the difficult decision of simply stopping all foreign imports into Australia, thereby rendering the bill non-applicable.”

Elphick has now launched a new online campaign called “Keep Shopping Open,” which warns Australians about the consequences of the government’s GST plan. “I’ve been through this before in the UK,” he told Guardian Australia.

“It was so complicated, you’d order something online and the postman couldn’t give it you so you’d have to go and collect it, or you’d have to pay a fee for the postman to come and then you’d have to pay a VAT on top of that. You’d end up either not buying from overseas ... or vendors don’t bother selling to you because there are so many complaints.”

The Senate standing committee on economics will hold public hearings on the bill in coming weeks.

In a submission to the inquiry, Elphick criticises the government for having a “fundamental lack of understanding” about how firms such as Amazon work.

He says online marketplaces simply connect buyers and sellers, they do not hold or on-sell products.

He says the legislation will also raise prices for all consumers, and if countries retaliated with a similar tax then small businesses like his would have to collect tax on behalf of foreign governments.

“I took that message to the Australian government late last year and was disappointed that given the government’s commitment to innovation and entrepreneurship they did not seem to understand my concerns,” the submission says.

“I urge the committee to consider the far reaching implications of this bill and to support Australian small businesses online who are exporting to the world,” it says.

Chris Bowen, the shadow treasurer, said Labor supported the principle of abolishing the low value threshold but it had “real concerns” for how Morrison intended to implement the measure.

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