Collection models for GST on low value imported goods

Inquiry report

Released 09 / 11 / 2017

The report's main tasks are to check that the legislated model is the best available collection model to extend the Goods and Services Tax (GST) to low value imported goods, and to consider any practical improvements to support its implementation.

This report was sent to Government on 31 October 2017, then tabled in Parliament and publicly released on 9 November 2017.

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Key points
Contents

The Australian Parliament recently legislated to apply the GST to low value imported goods from July 2018, using a streamlined collection model that places the responsibility for assessing, collecting and remitting the tax on foreign suppliers.
Given the decision to collect GST on low value imported goods, the legislated model is the most feasible among the imperfect alternatives at this time. Implementing the legislated model:
- should go some way to improving tax neutrality between imported and domestically retailed low value goods.
- will bring partial rates of GST collection (due mainly to exemptions for small suppliers, as well as significant compliance challenges), but the revenue obtained is likely to significantly outweigh the administrative and compliance costs.
- should avoid major disruption for consumers when importing goods, although some electronic distribution platforms have warned they may disable foreign vendors from selling to consumers in Australia.
Among the alternatives, ‘transporter-based’ collection models that require the delivery agent to collect GST could capture more revenue, but their feasibility is hampered by paper-based declaration processes still used for international mail; and the difficulties for Australia Post to negotiate agreements with myriad other postal services. They would also impose high administrative and compliance costs, and some would cause inconvenience for consumers.
‘Purchaser’ and ‘financial intermediary’ collection models, using advanced technological solutions to minimise high compliance and enforcement costs, have also been proposed. However, their efficacy is untested and their lack of readiness for deployment by mid-2018 make them unsuitable at this time.
There is an in-principle case to contemplate delaying implementation of the legislated model, to provide more time for technological changes to play out, to learn from the experiences of other nations and to avoid ‘first mover’ risks.
Nonetheless, the Commission considers there is insufficient basis to recommend delaying the implementation schedule, given the Australian Parliament’s decision to apply the GST to low value imported goods. Waiting for better alternatives will not necessarily prove fruitful. Nor would implementation now preclude change later.
The Commission has identified some prospective improvements to the design of the legislated model and enforcement strategy, although it has not been in a position to adequately evaluate these options. If the legislated model does not perform broadly as expected, these options should be considered as part of a future review.
The legislated model and the suitability of alternatives should be reviewed five years from commencement, or sooner if triggered by evidence of unduly low compliance, unintended impacts on consumers or adverse trade policy responses.

Preliminaries: Cover, Copyright and publication detail, Letter of transmittal, Terms of reference, Contents, Acknowledgements and Abbreviations
Overview - including key points
Conclusions and recommendation
Chapter 1 Setting the scene
- 1.1 The drive to apply GST to low value imports
- 1.2 The importance of online retailing
- 1.3 The online goods importation system and models for collecting GST
- 1.4 The inquiry
Chapter 2 The Commission’s assessment framework
- 2.1 Fiscal performance
- 2.2 Extent of compliance and collection
- 2.3 Business compliance costs
- 2.4 Consumer burdens and disruption
- 2.5 Compatibility with treaty obligations
Chapter 3 The legislated model
- 3.1 How the legislated model works
- 3.2 The Government’s revenue and costs estimates
- 3.3 Compliance and enforcement issues
- 3.4 The treatment of electronic distribution platforms
- 3.5 Impacts on businesses
- 3.6 Impacts on consumers
- 3.7 Trade matters
Chapter 4 Potential improvements to the legislated model
- 4.1 Backstopping the legislated model with border collection processes
- 4.2 Expanding the ATO enforcement toolkit
- 4.3 Simplifying interactions between the border and the legislated models
Chapter 5 Transporter collection models
- 5.1 The models
- 5.2 Feasibility of the models
- 5.3 Assessment of the models’ performance
Chapter 6 Other collection models
- 6.1 Purchaser collection models
- 6.2 Border collection model
- 6.3 Financial intermediary models
Appendix A Consultation
References

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