Closing shop - it's all the fault of GST

[Ross]

I think the reason for wanting to charge the GST on low value imports has changed somewhat now. The primary reason is to give the states extra revenue (I've heard a figure of almost $1 Billion based on current figures). The cost of administering this will be borne by the federal govt so the costs involved in doing it aren't really relevant. Trying to please retailers is just a secondary thing that as we know won't really work anyway.

[santacruzscott]

The only way it could be cost effective is the Credit Card model , which I'm sure the banks would not be impressed having that thrust upon them.


Some figures and quotes from news sources over the last few days.

This one makes me laugh............
Australian Retailers Association executive director Russell Zimmerman said “There are different methods. One is getting every retailer who sends goods from overseas simply to register for the GST.”

A CHOICE survey found that while saving money was an issue, convenience was a larger factor.

From the productivity commission in 2011,
"Lowering the threshold to $20 would raise in excess of $550 million in tax revenues, but the cost of the processing using the current system would escalate to over $2 billion — more than three times the additional revenue collected,” the Commission stated.

[Xplora]

It's worth noting that just about all OS retailers absorb the cost of freight for carts above 75 bucks. While the Productivity Commission is probably right about the collection, they are comparing 1000 bucks to 20 bucks. What happens if it is 200? 100? 50? These issues are not difficult to address - it isn't economic to be buying these things from OS if you are only saving 5 bucks after GST. I have no doubt that it might simply be breaking even at 200 bucks, but the fact remains. And this cannot change regardless of the arguments against it. The GST exemption on low value imports is a serious competitive disadvantage to our retailers. There is fat to be trimmed, no doubt. But the entire reason for using the GST is to create a better tax that doesn't do stupid things like tax family cars but no taxes on private jets. We don't charge GST on exported goods, because that would rob our economy of trade opportunities.

I think we should be realistic - it is right and fair for Parliament to move towards taxing all imported goods, and working out how to make that happen. Blanket import charges could help. There is a 50 dollar duty right now, if you made that a minimum 20 bucks to cover GST admin for low value stuff, and 200 was your threshold for charging, that strips out the benefits of low value transactions.

It can be done, and it should be done. Our tax system wasn't set up to make c r c or Wiggle rich - it was supposed to pay for our schools and hospitals and roads.

Now - if people STILL buy OS despite these barriers (I know I would, it wouldn't change a thing for me) then that's not a problem. The system is equitable and doesn't disadvantage retailers at that point. I don't expect retailers to flourish, I just expect fairness. Every single reference to the threshold as justification that it shouldn't be charged is ridiculous, because it ignores the fact that ALL taxes create negative distortions in the economy. We just design things to be fair and equitable to offset the negatives.

Santa, the credit card model isn't necessarily cost effective at all... I'm just saying that it can be done

[jasonc]

Now - if people STILL buy OS despite these barriers (I know I would, it wouldn't change a thing for me) then that's not a problem. The system is equitable and doesn't disadvantage retailers at that point. I don't expect retailers to flourish, I just expect fairness. Every single reference to the threshold as justification that it shouldn't be charged is ridiculous, because it ignores the fact that ALL taxes create negative distortions in the economy. We just design things to be fair and equitable to offset the negatives.

Santa, the credit card model isn't necessarily cost effective at all...

Was discussing it with a workmate today. All it will do is change us from doing orders of below $1000 to grouping all our orders together and doing big $ orders to make the fees/duty worth it.

EDIT: Yes, I'll be stocking up in April next year before the budget is released

[Xplora]

And that's OK Jason - that's how import businesses start up. Group buys include strangers and eventually there is enough cash involved to start onselling the excess product to other strangers.

That's the thing - we aren't trying to protect retailers. We are trying to create a fair tax system here - there is no successful economic system in the world that suppresses local activity for the benefit of outsiders. Wiggle isn't making Australia rich by selling more groupsets. They are making Britain (and Britons) rich. We have thousands unemployed here. If you can employ any of them through a fairer system to Australians, then that's what you need to do. There is nothing protectionist about a level playing field.

If you still go overseas, that's OK. Parliament doesn't have a responsibility to force local trade, if they are economically progressive. We aren't China.

[RonK]

No prizes for guessing Xplora's political leanings.

[jasonc]

That's the thing - we aren't trying to protect retailers. We are trying to create a fair tax system here

The problem isn't protecting retailers, it's that the system protects distributors. They are the ones making the money.
Are we meant to be part of some free trade agreement?

[Xplora]

RonK,
Being fair to Australian residents? Yep, that's a sure fire vote for... hmm everyone? If you want unfair tax rules, you need your head read. Of course, if you aren't reading what I'm putting up, that's a sure recipe for getting it wrong.

It seems like everyone likes to dodge tax until they can't get in on the dodge anymore. Everyone likes well paid teachers and nurses until they have to write the paycheques themselves. Everyone likes welfare handouts except when they lose money going to work, by losing the handout.

This isn't a political comment, it's just plain common sense. You do not make business harder for your citizens, and easier for overseas businesses, unless you do not want your citizens in that business.

Jasonc,
The distributors are expected to represent the brand in a legal capacity, not just bring in goods and onsell them. Shimano Japan cannot be forced to distribute via multiple channels, if they don't want to. That's the biggest challenge. There are legal protections for these exclusive arrangements. It's not a free trade issue, it's a consumer protection issue and that's up to the ACCC, not the trade people.

[Calvin27]

I think we should be realistic - it is right and fair for Parliament to move towards taxing all imported goods, and working out how to make that happen. Blanket import charges could help. There is a 50 dollar duty right now, if you made that a minimum 20 bucks to cover GST admin for low value stuff, and 200 was your threshold for charging, that strips out the benefits of low value transactions.

It can be done, and it should be done. Our tax system wasn't set up to make c r c or Wiggle rich - it was supposed to pay for our schools and hospitals and roads.

Great points but I disagree with the fairness. That means not slapping on an administration charge just because the numbers don' add up. I agree we should find the point where it is viable to collect GST and collect it - I would guess $500 but we can let some economist decide this. The argument that we are not here to make c r c/wiggle rich is not really appropriate otherwise we'd be operating in a protectionist environment. We focus on our competitive advantage (digging up and selling our backyard) others focus on theirs - cheap bike parts (why is it uk?).

The other question is what actual impact does the GST achieve? Online shopping purchases are skewed towards the lower end of the purchasing scale. Most people I know (and I recall a survey somewhere too) purchase online for parts/accessories and buy complete bikes from local retailers. If we can't efficiently collect GST from small sales and they are the bulk of purchases, what is the point?

[casual_cyclist]

The only way it could be cost effective is the Credit Card model , which I'm sure the banks would not be impressed having that thrust upon them.


Some figures and quotes from news sources over the last few days.

This one makes me laugh............
Australian Retailers Association executive director Russell Zimmerman said “There are different methods. One is getting every retailer who sends goods from overseas simply to register for the GST.”

A CHOICE survey found that while saving money was an issue, convenience was a larger factor.

From the productivity commission in 2011,
"Lowering the threshold to $20 would raise in excess of $550 million in tax revenues, but the cost of the processing using the current system would escalate to over $2 billion — more than three times the additional revenue collected,” the Commission stated.

The key is in the last sentence, "using the current system". Don't use the current system and it won't cost $2 billion. It would be interesting to know how other countries address this issue. e.g. in the UK can you purchase goods overseas VAT free and import them with no impost?

[RonK]

Pretty obviously, offshore banks will do well in the event local banks are forced to become tax collectors...

[Ross]

As much as I don't want to pay any more than I already do for my bike parts I think Xplora does have a point. The problem is though, the more money the politicians steal err...I mean tax from us the more they waste by giving themselves massive pay rises and perks or simply spending it on things it doesn't need to be spent on (ACT residents will be familar with Skywhale).

I will certainly slow down my spending if I have to pay ~50%* more for things.
*10% GST plus handling/processing charges

[Xplora]

Pretty obviously, offshore banks will do well in the event local banks are forced to become tax collectors...

Australian banks are amongst the most profitable in the world. I recall at least 3 of the big four are in the world's top 10 for profitability. We won't have offshore banks doing well from this - you are forced to engage the Australian banking system if you do business here. HSBC is not Australian, but their Australian operations would be subject to the same rules as Westpac. (in the event of the hypothetical scheme I suggested).

Regarding the comment tax collectors... every single employer in this country is a tax collector. PAYG Withholding is not paid by the worker. It is never given to the worker - it is simply "attributed" to them. Given that most wage earners have virtually no tax return to speak of, reality is that the worker doesn't pay the tax. It is a cost to business.
Every person selling something or contracting, cashflow over 75K (virtually all real business that could be expected to sustain a person long term) is also a tax collector. That's the GST. It's a significant burden on a business. It will cost many businesses a lot of dollars to administer and make sure they send the money, lest they incur the wrath of the ATO.

I understand where you are coming from, but ultimately, the banks won't profit or lose from my hypothetical "manage OS GST" scenario. They will pass the costs to the consumer. The thing is - we already pay for the collection of the GST etc since it is included in the price of your goods and services. Even your GST free things include the cost of administration, because the accounting package that you need to process the GST portion isn't any less expensive because you sell fresh food.

I think the whole affair is ugly, but no one wants to pay for their own education, welfare or healthcare, so the beast of the state must be fed.

[biker jk]

I'd be all for lowering the $1,000 threshold for GST on imports so long as the ACCC forced distributors to slash their unjustified fat margins, starting with Shimano Australia. We all know there is an Australia price premium on everything from bike parts, computers and software, motor vehicles, etc.

[casual_cyclist]

Every person selling something or contracting, cashflow over 75K (virtually all real business that could be expected to sustain a person long term) is also a tax collector. That's the GST. It's a significant burden on a business. It will cost many businesses a lot of dollars to administer and make sure they send the money, lest they incur the wrath of the ATO.

This is where your argument falls down. Every year I produce 12 business activity statements for 3 separate businesses and also prepare 2 company tax returns for the companies at the end of each year. I prepared the tax returns for these businesses pre-GST and have done so since the introduction of GST.

Post-GST the tax administration of the business is infinitely simpler and less time consuming. The old sales tax system was a nightmare and the tax administrative costs for these businesses was relatively high compared to turnover.

Under the current system, there is virtually no administrative cost associated with GST collection, remittance to the ATO and reporting. In fact, quarterly reporting (business activity statments) saves time at the end of the year in the preparation of company tax returns because the numbers are already in my tax system. What used to take me weeks at the end of the year can now be done in a matter of hours.

With the business I report on, the current system saves time, effort and money compared to the previous system.

[Xplora]

With the business I report on, the current system saves time, effort and money compared to the previous system.

I don't disagree that there are benefits to the current system, you are likely in the minority when it comes to your capabilities on the accounting. For MANY businesses, it has gotten harder. It wouldn't need to be a majority; just to say that the burden of the BAS is reasonably bad for lots of people. We're also talking about a population that has people who are ten years behind in their returns.

Would you be in favour of simplifying the system even further? THAT is the billion dollar question.

[RonK]

Pretty obviously, offshore banks will do well in the event local banks are forced to become tax collectors...

Australian banks are amongst the most profitable in the world. I recall at least 3 of the big four are in the world's top 10 for profitability. We won't have offshore banks doing well from this - you are forced to engage the Australian banking system if you do business here. HSBC is not Australian, but their Australian operations would be subject to the same rules as Westpac. (in the event of the hypothetical scheme I suggested).

The profitability of local banks is irrelevant. Offshore credit cards are readily available and the commonwealth can't force them to collect taxes.

[casual_cyclist]

With the business I report on, the current system saves time, effort and money compared to the previous system.

I don't disagree that there are benefits to the current system, you are likely in the minority when it comes to your capabilities on the accounting. For MANY businesses, it has gotten harder. It wouldn't need to be a majority; just to say that the burden of the BAS is reasonably bad for lots of people. We're also talking about a population that has people who are ten years behind in their returns.

Not if they previously had to deal with sales tax. If you think for someone who moved from sales tax to GST and is has gotten harder then you don't know anything about sales tax.

Would you be in favour of simplifying the system even further? THAT is the billion dollar question.

Always! Any time I spend accounting is not productive time. I am also opposed to provisional tax for small businesses. Our whole tax system is too complex and inefficient. I would love to see someone simply the whole tax system and make it more efficent. I will not hold my breath.

Back to the topic at hand... GST on imports for smaller purchases... I would not be opposed to such a system if it was simple and efficient. I will not hold my breath...

[DavidS]

That means not slapping on an administration charge just because the numbers don' add up.

Yep, this is where I think they go too far. Sure, reduce the threshold. But don't either 1) reduce it so far it is costing the government more than they are raising (ie: they make a loss) or 2) try and compensate for 1 by imposing some sort of admin charge. Either of these scenarios is silly.

Personally I can't see why they would want to reduce the threshold anyway. Politically it will not play well. If they just leave it at $1,000 it gets eroded in real terms by inflation anyway.

As for the $20 limit, that is rubbish. Clearly the government are trying to set expectations and suggesting the threshold will be set at $20 is just a kite flying exercise. They will likely reduce the threshold, but they will reduce it to something like $200 or even $500 and try to look good in the process because they didn't reduce it to $20.

DS

[santacruzscott]

That means not slapping on an administration charge just because the numbers don' add up.

Yep, this is where I think they go too far. Sure, reduce the threshold. But don't either 1) reduce it so far it is costing the government more than they are raising (ie: they make a loss) or 2) try and compensate for 1 by imposing some sort of admin charge. Either of these scenarios is silly.

Personally I can't see why they would want to reduce the threshold anyway. Politically it will not play well. If they just leave it at $1,000 it gets eroded in real terms by inflation anyway.

As for the $20 limit, that is rubbish. Clearly the government are trying to set expectations and suggesting the threshold will be set at $20 is just a kite flying exercise. They will likely reduce the threshold, but they will reduce it to something like $200 or even $500 and try to look good in the process because they didn't reduce it to $20.

DS

I agree , $500 is my guess.

[RonK]

As for the $20 limit, that is rubbish. Clearly the government are trying to set expectations and suggesting the threshold will be set at $20 is just a kite flying exercise. They will likely reduce the threshold, but they will reduce it to something like $200 or even $500 and try to look good in the process because they didn't reduce it to $20.

I don't think so - for GST collection to be effective, all parcels will have to inspected - not just the random inspection regime that is currently in place. This is going to cost big time, so you can bet that those costs will be recovered. Since the majority of offshore purchases are likely to be less than $500 or even $200 it would make no economic sense to inspect all parcels but not collect on the majority of them.

[Xplora]

Pretty obviously, offshore banks will do well in the event local banks are forced to become tax collectors...

Australian banks are amongst the most profitable in the world. I recall at least 3 of the big four are in the world's top 10 for profitability. We won't have offshore banks doing well from this - you are forced to engage the Australian banking system if you do business here. HSBC is not Australian, but their Australian operations would be subject to the same rules as Westpac. (in the event of the hypothetical scheme I suggested).

The profitability of local banks is irrelevant. Offshore credit cards are readily available and the commonwealth can't force them to collect taxes.

Weasel word alert:
The Australian Government COULD make it illegal to possess these offshore credit cards. I'm not sure about how to do this practically; don't let the facts get in the way of a good story, as they say. I think the key issue for my thinking, regardless of specifics, is that the realistic policing of GST collection can be achieved by one of two points - shipping to Australia, or payment leaving Australia. These are relatively easy to address, compared to asking 23 million individuals to send the GST to the ATO. It's hard to get things into and out of the country without being traced. I'm ignoring people bring in luggage, because you can't run a business importing Shimano cassettes by flying to the UK (or even Japan) and stuffing a suitcase.

DaveS, I think you've forgotten that the admin charge already exists. It's the Customs processing charge of 50 bucks. You can call it another name, but it's a flat increase on the value of the package. I try to avoid calling ideas silly when they already exist and there is no campaign to have these other silly old ideas removed.

Coffee time damnnnnnnn

[Calvin27]

The Australian Government COULD make it illegal to possess these offshore credit cards.

That would be protectionism. The biggest issue I have with all this (and economics in general) is governments always play favorites for specific industries. All industries should be treated equal - either take the free market approach or take the protectionism approach. Why does the government constantly tout free market when this is essentially a protectionist policy? Slap the GST where it makes sense and be done with it.

Or alternatively, slap on a bulk low value GST surcharge tax for couriers and postal services that they pass on to customers and apportion for small purchases. That will solve the problem and piss a few people off in the process! (I'm pretty good at making up taxes eh? Maybe I should try for the treasurer job one day! )

[Xplora]

"Slap the GST where it makes sense and be done with it" is a highly loaded term, and I think it is the reason this thread still exists. The GST isn't in enough places yet, for various reasons, and arguably is not high enough. Doing things that make sense isn't a part of the picture when putting these things together.

Sadly, it seems that a lot of people are refusing to acknowledge that all taxation is a negative, both socially and economically. We just hope that the money we spend is worth more to the public than the money we take. I can accept an argument in favour of this view, even if I didn't agree with it. If we can't accept that all taxes are fundamentally negative, low value GST goods cannot be discussed intelligently.

[RonK]

Weasel word alert:
The Australian Government COULD make it illegal to possess these offshore credit cards. I'm not sure about how to do this practically; don't let the facts get in the way of a good story, as they say. I think the key issue for my thinking, regardless of specifics, is that the realistic policing of GST collection can be achieved by one of two points - shipping to Australia, or payment leaving Australia.

Would see significant difficulties for the commonwealth to make offshore credit cards - say NZ or UK cards illegal. Then there's the Swiss, Caribbean, Irish and Channel Islands banks.

The inspection of goods shipped is already problematic, as we have heard. And just to reiterate - the GST collected goes straight to the states, so a significant cost burden on the commonwealth.