Why isn’t this just a 10% tariff?

So the GST is often described as being a tax on consumption – that was the intention of the government when it was introduced. But in fact it is not legislated as a tax on consumption – the legal incidence of the GST is a tax on sales with an input credit. It is a tax on the value add that occurs within firms. The final consumer cannot access input credits and consequently bears the economic burden of the tax.

That’s all very well and good and that is how the GST is meant to work in theory. The legal incidence is on value add at the company level while the economic incidence falls on the final consumer.

Life becomes slightly more complicated when trading with foreigners. If the objective is to levy a 10% tax on consumption then it seems clear that imports should be taxed at 10% too. But … this is where the design of the GST becomes important. It is effectively a tax on consumption, but it is actually a tax on sales (with an input credit).

Historically the Australian government has collected the “GST” on goods (and theoretically services) over $1000 as they entered Australia. Australian consumers are required to pay the GST. But … what Australian consumers are paying is not the GST, the government is not paying the seller their input credit. They are simply paying a 10% tariff with the Australian government quietly pocketing the input credit that it should be reimbursing the seller.

Now the Australian government is planning to reduce that $1000 threshold to zero.  The government is suggesting that foreign firms voluntarily collect the 10% GST – yet the government has no legal authority to tax foreigners (I would expect the foreign governments might have something to say about that) so it is relying on good old fashioned bullying. Plan B is to extend that current practice to all imports. But it occurs to me that a uniform tax of 10% on all imports is just another tariff. I can’t think of any good reason why all our trading partners don’t immediately impose countervailing tariffs on our exports.

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61 Responses to Why isn’t this just a 10% tariff?

  1. closeapproximation

    Hmmmm. Hairy.

    As an aside, surely there are many goods over $1000 purchased from overseas (over the internet) are not getting the tax.

  2. Motelier

    This is not just applied to imports.

    We purchase fresh food (no gst applied at purchase), produce meals that include gst.

  3. Diogenes

    As an aside, surely there are many goods over $1000 purchased from overseas (over the internet) are not getting the tax.

    From my experience it is collected by the carrier – I have had Aust Post and DHL not release parcels until the GST is paid – based on the declared value of the goods. Not sure if it works the same way for a container load

  4. stackja

    GST exceptions were Meg’s idea. GATT?

  5. stackja

    Liberty Quote
    An economy breathes through its tax loopholes.
    — Barry Bracewell-Milnes

  6. NewChum

    I think the retaliatory tariff meme is a bit like he big bad deflation meme. Something told to the undergraduates to scare them and keep them thinking along approved lines.

  7. Empire

    I think the retaliatory tariff meme is a bit like he big bad deflation meme. Something told to the undergraduates to scare them and keep them thinking along approved lines.

    What approved lines?

  8. .

    NewChum
    #2344632, posted on April 3, 2017 at 10:00 pm
    I think the retaliatory tariff meme is a bit like he big bad deflation meme. Something told to the undergraduates to scare them and keep them thinking along approved lines.

    Except the evidence against deflation is non existent, tariff retaliation has several examples of actually happening.

  9. Suburban Boy

    ” … the government has no legal authority to tax foreigners … “: with respect, Sinc, that is wrong.

    The constitutional position is clear that the federal government can (with some exceptions that aren’t relevant here) tax anyone, anywhere on any basis, provided it has legislative authority to do so – and I believe it has with this.

    The practicalities of collecting the tax and the political wisdom of doing so are, of course, different matters. But legal authority is beyond doubt.

  10. rickw

    Forget any logic or commonsense, they just need more money to waste, they’re not particularly concerned about how or where it is extracted.

  11. NewChum

    What approved lines?

    Whatever passes for economics 101. Lots of Keynes and macro, lots of comparative advantage and perfect competition.

  12. Adelagado

    I wrote a Catallaxy guest post on this issue 18 months ago explaining that a 10% tax on imports below $1000 will probably collect less than what it costs to implement; the main reason being that additional revenue will only come from items under $1000 that are imported for PRIVATE use. I argued that this category may be big in numbers but relatively small in actual dollars.

    http://catallaxyfiles.com/2015/06/10/guest-post-adelagado-a-very-expensive-hole-in-the-gst-import-threshold-argument/

  13. Infidel Tiger

    The Gerry Harvey Levy.

  14. incoherent rambler

    GST on imported goods.
    No GST on imported services (e.g. IT, shipping agents)

    Let’s make it hard for local service providers.

  15. Art Vandelay

    According to the economically illiterate Josh Frydenberg, this tax is going to create jobs.

    While he didn’t exactly explain how higher prices create jobs, he’s no doubt applying the same logic to the electricity industry. With the Coalition’s RET leading to a doubling of power prices, we’ll be swimming in jobs soon.

  16. Paul Farmer

    There is one key difference here , according to the wto literature. A tariff according to the wto is a customs duty that confers an advantage of price on a local producer.
    https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm

    So something produced locally by a business wouldn’t pay it but an exporter operating directly to a consumer via say the Internet or via an importer does pay it to the government. The importer is put at a disadvantage vs a vs the local producer.

    With the gst imposed on an exporter or end user customer in the case of Internet sales, the australian business can argue everyone is equally taxed on the final sale that leads to consumption. So there is no net advantage to a local producer in terms of price. Yes adding gst, in a sense adds a tariff to the foreign producer but in this case it equalises the price so their is no price advantage to the export supplier over the local supplier, so you would avoid the wto nailing you as bringing in a tariff by stealth as your not conferring an advantage on your own local production in terms of price.

  17. Paul Farmer

    Sorry, I realised I could have worded my first response better. The key here is a tariff discriminates against foreign production via price. A gst applied on foreign imports doesn’t discriminate against foreign production as the intent is to apply a consumption tax universally to all goods no matter the source. A foreign country could reciprocate against Australia provided they equally tax their own local production the same way and there wouldn’t then be discrimination. Given what we export but in the main and given with these items we tend to have significant comparative advantage in , the risks of retaliation I suspect are low.

    Ie. Given we mainly export iron ore and coal, and gas, items that tend to be inputs into production, I can’t see mum and dad in China importing these over the net anytime soon for a small DIY foundry in the back yard, as much as our chinese friends have taken to capitalism with gusto , I think we can relax….:) , the risks of effective retaliation are small.

  18. Ray

    Tariffs are intended to distort consumption by raising the price of imported goods relative to the price of domestically produced goods and thereby encourage consumption of the domestically priced goods.

    The GST does not do this. Instead it is designed to raise the price of all goods equally, so there is no change in price relativities between local goods and imported goods. In other words, the GST is not a mechanism to protect local production and so it is not a tariff.

    By exempting imports under $1,000, the GST does introduce distortions by favouring those imports over local production and so proposals to remove this exemption should be seen as making the tax more efficient. Of course, eliminating the $1,000 exemption is strongly supported by local retailers who are disadvantaged by the competition such tax exempt transactions create, and they do have a point.

    However, we should not lose sight of the fact that the exception to these transactions was introduced because the administrative burden of applying GST to so many small imports was too high. Thus the only justification for removing the exception is if the cost of administering the GST on these imports can be managed effectively through new processes or new technology. If this can be achieved, then the removal of the exemption is justified, if not, it is only a form of protection for inefficient local retailers.

  19. Ray

    The legal incidence is on value add at the company level while the economic incidence falls on the final consumer.

    This statement over simplifies the concept of economic incidence. The only time in which the economic incidence would fall completely on the consumer is where there is perfectly elastic supply and perfectly inelastic demand. Given that such elasticities are highly unlikely, we need to conclude that some of the economic incidence can and will fall on companies.

  20. Ray

    As for the description of the GST as a tax on sales, this is rather misleading. The tax is certainly administered via a credit invoice method, with outward tax invoices being offset by inwards tax invoices, however, the economic incidence is the value add at each point of the supply chain.

    When a company produces a good or service, it does so with a number of inputs such as the cost of goods sold, labour and administrative costs. Any residual from these costs of production is profit. Now an invoice based value added tax provides a credit for any purchases, which means the factors of production which make up the value add of a business are the cost of labour and the residual profit. It is this labour and profit which are taxed in the value added approach. Given that the only value add at each point in the supply chain is labour and profits, we can consider the GST to be a tax on labour and profits. In other words, the GST is predominantly a tax on incomes.

    Most people consider the GST to be a consumption tax because investments are not taxed directly. Whilst this is so, there is an indirect tax because any profits earned on an investment will be subject to the GST as described above.

    Thus the GST is not a sales tax and it is not a consumption tax, it is an income tax.

  21. alexnoaholdmate

    Tariffs are intended to distort consumption by raising the price of imported goods relative to the price of domestically produced goods and thereby encourage consumption of the domestically priced goods.

    The GST does not do this. Instead it is designed to raise the price of all goods equally, so there is no change in price relativities between local goods and imported goods. In other words, the GST is not a mechanism to protect local production and so it is not a tariff.

    When applied to imported goods under $1000 – which was, you know, the entire context of Sinc’s post – it IS a tariff.

    The entire purpose IS to make purchasing from a foreign retailer less attractive. It IS to make consumers reconsider whether they’ll buy online or from a local outlet.

    It is, therefore, a tariff, as the entire reasoning behind applying it to purchases under $1000 is to ensure, in your own words, that it will “raise the price of imported goods and thereby encourage consumption of the domestically priced goods.”

    Thus it is a tariff.

    Quibble all you like about technicalities – what a fine economist you make! – but if it was re-jiggered precisely to have the same effect as a tarriff, it DOES have the same effect as a tarriff, and it walks, talks, and quacks like a tarriff, then it’s a tarriff.

  22. Entropy

    If I buy a good from OS and have to go to the post office to pay the GST, it’s a tax, not a tariff.
    I don’t like the massive inefficiencies and effort and costs involved in making Gerry Harvey, whose shops I despise, happy, but I don’t regard it as a tariff. Tariffs get built into the price of goods, and this is a tax at the end point, which unfortunately, is at the post office.

  23. Ray

    As an income tax, the GST has some major advantages over traditional income taxes. First, it is generally levelled at a flat rate which is efficient (i.e. marginal tax rate equals average tax rate).

    Second, it contains an automatic exemption for capital. Under the existing income tax system, a company which invests in new production technology will be taxed on any retained profits which it can then recoup over several years via the depreciation system. Under the GST, any purchases of capital equipment will carry an input tax credit such that no tax will be payable until the investment earns a profit. As a result, the GST provides an significant incentive for investment.

    Third, a GST assists exports by removing local income taxes from exported goods. This works by zero rating the exports such that the overseas buyer pays no tax, while the exporter is still entitled to claim the input tax credits.

    Thus we can consider a GST, not only to be an income tax, but a very efficient income tax, one that approximates a proportional or flat tax system. That being said, significant inefficiencies are introduced with the exceptions for food, healthcare, education and financial services. On the other hand, there are good reasons for these exemptions.

    As a result, the GST is superior to our existing income tax system and would have been an replacement for that existing income tax system.

  24. Tel

    The final consumer cannot access input credits and consequently bears the economic burden of the tax.

    You mean the NOMINAL economic burden.

    Some of the actual economic burden must fall along the supply chain because taxed consumers will purchase less of the product, and therefore the suppliers will be forced to drop prices below what they would be able to charge without a tax.

    https://en.wikipedia.org/wiki/File:Tax_incidence_%28mixed%29.svg

  25. Ray

    Alexnoaholdmate, two things you need to understand. First, tariffs are not the only mechanism available if a government wants to introduce protection. They can use subsidies, voluntary agreements or quotas. These may have similar effects as a tariff but they are not tariffs. Nor is removing the $1,000 threshold for GST on imported goods.

    Second, we are not talking about implementing any of these protection mechanisms, only about removing an administrative loophole which assists foreign producers.

    Remember that the exemption does not exist to assist those foreign producers but to reduce the administrative burden of the tax. These reasons still apply today. If the burden of removing the $1,000 exemption can be managed then it should be removed. If not, then the exemption should remain, it is as simple as that.

    This is not about protection, it is about efficiency. Just because Gerry Harvey or any other retailer may benefit from the change is no justification for a perverse opposition to achieving efficiency gains.

  26. don coyote

    I recently bought an instrument (a pH meter) directly from China. It cost $18, including postage. I can buy exactly the same meter from an Oz retailer for $125, with alternatives also made in China.
    So applying GST on this item (and many others) is not protecting local producers but the margins of local retailers.
    If such a policy is to achieve these stated goals, there should be Australian made alternatives available at an equivalent price.
    The GST amount makes no difference to the decision where to buy. I may be a conspiracy theorist, but I believe this policy is being pushed by big local retailers in the hope it will be administratively and economically impossible to operate, and will be subsequently replaced by direct import restrictions for individuals.

  27. alexnoaholdmate

    Ray, you know who you sound like?

    “We’re going to put a price on carbon.”

    “Sooo… a carbon tax?”

    “NO! Not a carbon tax! A price on carbon! It will work the same way as a tax, have the same effect as a tax , and will be designed to act precisely as a tax would – but it’s technically not a tax at all. No. It’s a price on carbon.”

    The new GST regulations work as a tariff, have the same effect as a tariff, and are designed to protect a local industry exactly as a tariff would, by reducing the attractiveness in the mind of the consumer of the non-local competitor.

    Call it what you like. It’s a tariff.

  28. Ray

    Alexnoaholdmate, quarantine rules are well and truly entrenched in the country and designed to protect our agricultural industries from the importation of exotic pests and diseases. Of course, this means that our agricultural industries are protected from foreign competition as well. Does that make quarantine rules a tariff. Of course not. It would be simply stupid to suggest this.
    Whilst quarantine restrictions may provide protection from foreign competitors, they are allowed because they deliver health benefits to our agricultural producers. The simple fact is that a policy initiative can have more than one outcome.
    So too does removal of the $1,000 GST threshold. It may benefit local retailers, but it is not a tariff and not even a protectionist measure of any description if it is removed to achieve efficiency gains.

  29. Megan

    The Gerry Harvey Levy.

    And that is why I will never set foot in a single one of his stores ever again . Most successful lobbying campaign ever. And the suckers that pose as the Liberal Party fell for it.
    Also, not sure that a significant number of young internet shoppers are all thatcaware of this shiny new tax. Wait for the screams of outrage when their favourite internet store stops shipping to Australia or they have to pay the ransom to release their package from the carrier.

  30. Rabz

    According to the economically illiterate Josh Frydenberg, this tax is going to create jobs.

    Gee, then we need more taxes.

    Forget any logic or commonsense, they just need more money to waste, they’re not particularly concerned about how or where it is extracted.

    Exactly.

  31. alexnoaholdmate

    Does that make quarantine rules a tariff. Of course not. It would be simply stupid to suggest this.

    It WOULD be stupid to suggest this, Ray. That’s why no one did.

    Is the purpose of quarantine laws to financially protect a domestic industry? To purposely make overseas imports less competitive vis-a-vis the local product?

    Of course not.

    The purpose of applying the new GST regulations to online retailers IS to make them less competitive in regards to the local equivalent.

    Thus it is a tariff – or a sneaky way to apply all the effects of a tariff while avoiding the name.

  32. J-man

    This new law does not remove the $1000 threshold. Rather, it requires overseas vendors with more than $75,000 of Australian sales or online marketplaces with more than $75,000 of Australian sales to remit 1/11 of the sale price of goods that are $1000 or below to the ato. There are various rules to deal with potential overlap between the existing customs process of applying duty and Gst at the border and this new rule. Further rules for dealing with the sale of multiple items where the total is above $1000 are included as are rules to ensure Australian customers cannot get around the tax through the use of services that receive and resend your goods from the country of origin.

  33. Bruce in WA

    The Gerry Harvey Levy.

    Indeed. Used to be a regular customer at Hardly Normal’s. Nevermore.

  34. NewChum

    Ray makes some good points here.

    A 10% GST on imported services like call centres or outsourced IT work would be easier to implement and collect a lot more cash than trying to inspect postal packages. Just make it a high threshold like invoices over $250k per fiscal year and it would collect plenty of money and highlight how many service jobs are moved offshore. The consumer impact would be far lower as well, given many the distance between the end product elasticity of demand and the increase in supply cost.

    Endlessly shipping service jobs offshore sounds great in theory but consumers hate it and Australians have no obligation to provide jobs for people in the Phillipines or India. They are also the types of jobs our universities are creating people for, and Australia could be an ideal service provider for international
    English speaking markets if we built scale and expertise in efficient delivery.

    Or we could just shrug our shoulders, let unemployment build and let a handful of Indians get rich so Telstra and Qantas can get an extra point or two of growth, for one quarter.

  35. Tim of Kilsyth

    Try sending something to the UK and NOT pay VAT or many other EU countries. I sent some catalogues to the UK to a customer and was lumbered. Like wise in Germany with a few samples

  36. Empire GTHO Phase III

    However, we should not lose sight of the fact that the exception to these transactions was introduced because the administrative burden of applying GST to so many small imports was too high. Thus the only justification for removing the exception is if the cost of administering the GST on these imports can be managed effectively through new processes or new technology. If this can be achieved, then the removal of the exemption is justified, if not, it is only a form of protection for inefficient local retailers.

    Surely the solution to the inefficiency problem is to have individuals (most businesses gaming the $1000 limit are sole traders) declare their net GST liability on their annual return?

    What is the real reason for the shakedown on the foreign sellers? It doesn’t make sense, unless the actual policy intent is to kill free trade and simply make it too difficult for the retail buyer to import superior products, cost advantaged or not.

    Of course we know the truth and Friedburger is a lying swine.

  37. Rococo Liberal

    Sinc,

    I suggest you look up the reverse charge mechanism.

    Also, if a business imports goods and services for use or resale in its business, then it get an ITC for the tax paid at customs.

  38. The BigBlueCat

    The purpose of applying the new GST regulations to online retailers IS to make them less competitive in regards to the local equivalent.

    No, the purpose is to collect a tax that has been otherwise avoided. GST was introduced to replace the old Wholesale Sales Tax system, which was an overly complex burden on suppliers in an attempt to hide taxes from the end consumer. At least with GST the tax is visible. You can argue all you like about it being a de-facto tariff, but it is part of the tax system and not part of a system designed to protect local producers. That it might have an impact on overseas suppliers is not a real concern – any major foreign company supplying to the retail market (eg. Harvey Norman) means Gerry Harvey gets the input tax credit on any GST paid on the supply. Gerry is only worried about cheap foreign competitors anyway – the extra 10% on price won’t really slow down the foreign internet trade, therefore it’s not a tariff.

    Really, this only affect individuals buying new electronic or household items from an overseas supplier (a somewhat risky project) – they should be paying a GST-inclusive price anyway, and they would if they bought locally. Local prices are higher for reasons other than the GST – it costs a lot to maintain bricks and mortar stores compared to operating from a shed in China.

    Or we could just shrug our shoulders, let unemployment build and let a handful of Indians get rich so Telstra and Qantas can get an extra point or two of growth, for one quarter.

    NewChum, this sort of service will have no impact whatsoever on end consumers – Qantas and Telstra will just claim the GST paid as an input tax credit. The real issue here is that labour is much cheaper in India and the Philippines, and that Australian consumers can have real communication difficulties when dealing with foreign call centre operators who don’t have the necessary language skills.

  39. Empire GTHO Phase III

    Endlessly shipping service jobs offshore sounds great in theory but consumers hate it and Australians have no obligation to provide jobs for people in the Phillipines or India. They are also the types of jobs our universities are creating people for, and Australia could be an ideal service provider for international

    Focus on the cause rather than effect. Until the unions and price fixing of labour by the state is destroyed, your idea belongs with fairy tales.

  40. Empire GTHO Phase III

    Fuck me. It must be Katterlaxy month, again. Who let the fairness fairy out of its cage?

  41. The BigBlueCat

    What is the real reason for the shakedown on the foreign sellers? It doesn’t make sense, unless the actual policy intent is to kill free trade and simply make it too difficult for the retail buyer to import superior products, cost advantaged or not.

    Er, to collect a tax that the end consumer should be paying …. it should only impact on consumers importing directly (eg. for stuff they buy on the internet from an off-shore seller and have delivered direct to their door). This stuff is cheaper than locally supplied stuff anyway, and will remain that way despite an extra 10% GST. The convenience (and risk) factors when buying anything from the internet remains the same. Most (if not all) of these suppliers are smart enough to work it out and pay the tax. There is no barrier here.

    People buying from the internet will still have a choice – buy locally and get local support should a product be defective or need a refund, or buy from an off-shore retailer who can’t or won’t be contactable should you have a problem with the product. Having said that, there are some good experiences to be had with off-shore suppliers in returning items – that is down to good customer relations on their part and not price.

    I buy some stuff from Wiggle and Chain Reaction Cycles – if the 10% GST was levied on those items I would still buy from them because they still work out much cheaper (and more convenient) than if I bought from my local bike shop. And I still support my LBS since I don’t buy all my stuff from an off-shore retailer; I need some immediate and practical advice from those guys.

  42. Sinclair Davidson

    Rococo Liberal – yes. I haven’t been quite clear. I’m thinking here about the low-value threshold for individual purchases.

  43. Adelagado

    The Government has no idea how much of the goods under $1000 are bought by registered businesses for resale or for their own business use. Hence they have no idea how much extra revenue this reduced threshold will actually raise, if anything. (Goods under $1000 bought by businesses are already taxed at final point of sale so there’s no extra income there). The only extra revenue will come from GST on private imports for personal use. Its rats and mice stuff. Research says the vast majority of purchases are under $30. So a massive amount of work will go into collecting a few dollars here and there.

  44. notafan

    I recently bought an instrument (a pH meter) directly from China. It cost $18, including postage. I can buy exactly the same meter from an Oz retailer for $125, with alternatives also made in China.
    So applying GST on this item (and many others) is not protecting local producers but the margins of local retailers.

    If that is the case, then you will still buy the instrument from China.

    If you use it for private purposes you will pay around $1.8o in tax, if it is for business then you will be able to claim an imput credit.

    I don’t understand how exactly the same good can cost $125 retail in Aus and $18 shipped from China

    perhaps someone will come along and explain why that is so.

  45. Rohan

    If you order 50 transistors or whatever from China via Aliexpress for $3.20 including postage, who, how, where and when do they collect the $0.32 GST?

    I think they should do it so the knuckleheads in Canberra can figure out that the cost of collecting is far outweighed by the cost of processing it.

  46. Empire GTHO Phase III

    Er, to collect a tax that the end consumer should be paying …. it should only impact on consumers importing directly (eg. for stuff they buy on the internet from an off-shore seller and have delivered direct to their door..There is no barrier here.

    Yes there is. If the offshore vendor can’t be arsed with the red tape they will simply refuse to sell to Oz buyers.

    The $1000 threshold existed for tax efficiency reasons and as Ray pointed out, until that can be solved it doesn’t stack up. I reckon the solution is individuals declare their net unpaid GST on imports in their annual return. Problem solved.

    This method has two disadvantages for statist cronies: it creates a dangerous precedent in shifting point of collection to the individual buyer and it fails to discourage offshore vendors selling retail direct to Oz buyers. In other words, it wouldn’t satisfy the policy settings preferred by ScoMo and Gezza.

  47. notafan

    Surely the solution to the inefficiency problem is to have individuals (most businesses gaming the $1000 limit are sole traders) declare their net GST liability on their annual return?

    Are you sure?

    The ATO collects the Bas data and afaik can match to lodged returns.

    I often import goods below the threshold for my my business, because I do it when I need specific random items. It is a pita doing my bas excluding those and then adding them back for income tax purposes, would be much easier if all my purchases were imput credited .

    I would guess that people doing multiple imports of items below the threshold for the purpose of avoiding GST would also be avoiding income tax on those sales, market and small online sellers ?

  48. notafan

    If you order 50 transistors or whatever from China via Aliexpress for $3.20 including postage, who, how, where and when do they collect the $0.32 GST?

    Then I want to know why my 500 gramme parcel to the next suburb cost me $6.70 to ship but someone in China can ship goods to Australia for $3.2o including postage.

    Australian Post has some explaining to do.

  49. Empire GTHO Phase III

    Nota

    I’m really talking retail purchase, which is the target of the new law. My point was that small businesses (resellers) which game the threshold are typically sole traders. I hadn’t considered the BAS issue.

    If I purchase any value of goods offshore GST not paid throughout the year, I simply declare the net liability on my income tax return. This satisfies fairness and efficiency.

  50. notafan

    If I purchase any value of goods offshore GST not paid throughout the year, I simply declare the net liability on my income tax return. This satisfies fairness and efficiency.

    And that is going to happen.

  51. Empire GTHO Phase III

    And that is going to happen.

    No different to declaring cash income.

    The tech also exists to record the liability on a transaction basis as the goods cross the border, but not in the hands of the state apparatus. I haven’t had much to do with waybills in recent history, but surely the data is now digitised? The threat of data matching motivates people to declare.

  52. notafan

    The tech also exists to record the liability on a transaction basis as the goods cross the border, but not in the hands of the state apparatus

    Wouldn’t that require foreign sellers to correctly label all goods and them all to be scanned on entry?

    Administratively that seems to be far more burdensome and far less effective, people won’t want to account for individual small transactions. That will simply shift the admin burden to individuals rather than the sender.

    btw A number of EU countries ‘force’ large international sellers to collect VATs on their behalf so that isn’t know iirc Amazon Australia already voluntarily collects GST on ebook sales.

    As for people refusing to ship here, they might it if becomes unprofitable, otherwise not so much.

    The only time I have heard of that happening was the Book Depository refusing to ship to Denmark which has a 25% Vat, on the other other hand Book Depository did collect tax on books shipped to France. (I know because I used to send my daughter books from there when she was living in France)

  53. J-man

    I will say again, Rohan and others, qualifying vendors selling to Australia will be required to remit 1/11 of the sale price. Businesses will remit Gst each 3 month period.

    Also,businesses will not get an input tax credit. Rather, they week trek the vendor they ate a business and will not be charged Gst. They will be required to enter an abn

  54. notafan

    I will say again, Rohan and others, qualifying vendors selling to Australia will be required to remit 1/11 of the sale price.

    I think they they will simply add gst during checkout.

    Amazon UK takes the VAT off for sales to Australia, Book Depository (owned by Amazon) add French VAT during checkout.

  55. Empire GTHO Phase III

    Administratively that seems to be far more burdensome and far less effective, people won’t want to account for individual small transactions. That will simply shift the admin burden to individuals rather than the sender.

    Why should the vendor be liable for this shit? The admin burden should occur in Australia. It’s our problem, not theirs. If I want to buy something from offshore and I have a tax liability, that’s my problem.

    Wouldn’t that require foreign sellers to correctly label all goods and them all to be scanned on entry?

    Declared values on all current waybills are accurate? Come on.

  56. Empire GTHO Phase III

    Amazon UK takes the VAT off for sales to Australia, Book Depository (owned by Amazon) add French VAT during checkout.

    I’ve had a few barneys with UK vendors who refused to deduct VAT. I actually asked one “what are you going to do with the VAT component?” – “remit it to the govt”. When I pointed out it wasn’t chargeable, and he was either stupid or lying, he got a bit cagey.

    The EU has a tax treaty for VAT.

  57. Empire GTHO Phase III

    I will say again, Rohan and others, qualifying vendors selling to Australia will be required to remit 1/11 of the sale price. Businesses will remit Gst each 3 month period.

    And a craftsman selling a low volume specialty product in some little known country is going to take that on? No. This law will kill the e-commerce promise of direct trade in specialty goods.

  58. Adelagado

    Sinclair Davidson…… “yes. I haven’t been quite clear. I’m thinking here about the low-value threshold for individual purchases.”

    ‘Individual purchases’ under $1000… yes this is the big unknown. No one knows what this actually amounts to in dollar terms. My guesstimate is that a 10% tax on this will amount to Sweet FA.

  59. JohnA

    Sinclair Davidson #2345087, posted on April 4, 2017 at 11:17 am

    Rococo Liberal – yes. I haven’t been quite clear. I’m thinking here about the low-value threshold for individual purchases.

    Adelagado #2345169, posted on April 4, 2017 at 12:49 pm

    The Government has no idea how much of the goods under $1000 are bought by registered businesses for resale or for their own business use. Hence they have no idea how much extra revenue this reduced threshold will actually raise, if anything. (Goods under $1000 bought by businesses are already taxed at final point of sale so there’s no extra income there). The only extra revenue will come from GST on private imports for personal use. Its rats and mice stuff. Research says the vast majority of purchases are under $30. So a massive amount of work will go into collecting a few dollars here and there.

    YE GODS, WHAT IT TAKES TO GET TO THE TRUTH!

    Whenever this Gerry Harvey propaganda pops up here, I have related my experience as a small business importer on this very issue.

    There is no exemption from GST on goods valued below $A1000.

    For any business working through a Customs Agent every shipment regardless of value is subject to GST and all the other tariffs and charges applicable to Customs entries. Charges are collected electronically via the Customs Agents. Then businesses registered for GST are entitled to an input tax credit as normal.

    For private end-user purchases, the charges (GST, quarantine, fumigation, admin charges, tariff duties, Uncle Tom Cobbly and all) are assessed, BUT if the amount to be collected is less than $A100, it is considered uneconomic to recover because the admin costs exceed the value to be collected.

    It is a COLLECTIONS POLICY, not a GST exemption. And it applies to more than the GST component.

    And it has taken over 50 comments for someone to realise?

    My apologies, Moderators. I have been enjoying this blog for many years, and I am not usually given to shouting.

    But one gets awfully tired of having to repeat oneself in the face of obtuse failure to understand this issue, where Cats are usually endowed with significant economic intelligence.

    To quote Charlie Brown: “Good grief!”

  60. Adelagado

    JohnA #2345531, posted on April 4, 2017 at 8:42 pm

    For any business working through a Customs Agent every shipment regardless of value is subject to GST and all the other tariffs and charges applicable to Customs entries.

    Yes, but It doesn’t matter if you go through a Customs Agent or not. If its under $1000 and its imported by a business for resale you will eventually pay GST. It gets paid/collected at the point of sale.

    I know because I do this all the time. I import packages ‘valued’ at under $1000 direct to my post office so that I avoid the delays of Customs. But ultimately I’m not dudding the ATO because it gets payed later through BAS.

  61. Gavin R Putland

    I can’t think of any good reason why all our trading partners don’t immediately impose countervailing tariffs on our exports.

    Most of them do, by imposing their own VATs, mostly at higher rates than ours. That’s all perfectly legal.

    A domestic payroll tax, OTOH, feeds into prices of exports and import-replacements, but not the prices of imports up to the point of importation.

    So, basically, if you raise any revenue at all from a payroll tax, you’re a patsy. I’ve been saying this for years.

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