Offshore tax move could backfire

Ben Butler

January 7, 2011


A MOVE by big retailers to sidestep GST by moving their e-commerce operations offshore risks being caught up in a Tax Office crackdown.


The idea has been floated by Myer and Harvey Norman, two of the retailers spearheading a controversial advertising campaign against the exemption from GST of imported goods worth less than $1000.


The Tax Office has noted international transactions and GST as an area of concern in its most recent compliance program, saying it would work more closely with other government agencies to ensure compliance with the law.


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Myer and Harvey Norman put up the idea while lobbying against tax-free offshore shopping, but other retailers say it would be better to concentrate on working with government to get better enforcement of existing GST and import rules.


Yesterday the Fair Imports Alliance, an umbrella group, attacked the big retailers’ coalition for its attempts to ”bully government” into ditching the $1000 threshold, saying the advertising campaign would prove counterproductive.


The Tax Office is already cracking down on GST avoidance through a program that has been allocated $337.5 million over the next four years. It has pledged to step up work on GST compliance in international and cross-border transactions.


”Our use of data from third parties, such sources as Customs and AUSTRAC, will enable a better-targeted view of international transactions and ensure compliance checks, education and marketing messages reach businesses at higher risk,” the Tax Office said in its 2010-11 compliance program.


The note was issued in mid-December, a week after the Harvey Norman boss, Gerry Harvey, said he would follow Myer’s lead and set up an offshore e-tailing website.


A spokeswoman said the Tax Office was legally barred from commenting on individual cases.


”Whether or not the ATO would consider the application of the gener al anti-avoidance provisions depends on the facts and circumstances of that particular arrangement,” she said.


An alliance spokesman, Brad Kitschke, said a lack of enforcement meant the $1000 threshold was being used as a loophole, hurting retailers who played by the rules.


Alliance members include the Australian Retailers Association.


”We cite the example of someone who could sit at home and import multiple packages up to the value of $1000,” Mr Kitschke said.


”They don’t pay GST or customs duties on those goods. They then sell those goods through eBay or through markets or theTrading Post or other means and they don’t apply GST when they sell those goods.


”So GST is not being collected at two points, as well as customs duties on the way in.”


The situation was made worse because ”a lot of those people aren’t paying income tax”.


He said 7.5 per cent of government revenue came from customs duties. ”If those are undermined, those hospital beds, schools, police – payment for those, need to come from other means.”


He said the alliance was not arguing for any particular threshold and supported a Productivity Commission inquiry that will look at problems confronting the retail industry.


”We don’t believe the way Gerry Harvey, Solomon Lew and that particular group have engaged is the right way to go about things and we don’t believe that it will ensure the best outcome for the retail sector and consumers.”


It would be ”irresponsible” for the government to cave in to the ”loud voices” of the big retailers, he said.

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