It’s claimed that Australian Treasury officials have told eBay that the only expect a 25% to 30% compliance rate if they go ahead with their GST (Goods and Services Tax, roughly equivalent to UK VAT) changes. That would leave 70% to 75% of sellers dodging the tax.
We recently wrote about the GST changes which would see the current threshold of AUS$1000 tax free imports reduced to zero. The issue is that Australia wants to place the burden of collection on the overseas retailers. That would mean a retailer in the UK who sold one item to Australia would have to remit a GST return.
The marketplaces themselves could become liable, but they have resolutely dodged collecting tax on behalf of their sellers in the past. Rightly so too – how can they reliably know what VAT scheme I may be on and what sales I may make off their marketplace into different countries to know if I’ve hit a sales threshold or not? eBay have gone so far as to say that if the GST changes come into force, they may take the drastic step of blocking Australians from making purchases from overseas sellers.
Of course marketplaces blocking sales won’t make the slightest bit of difference – they’re simply the easiest sales to monitor. Australians won’t suddenly decide that they don’t want overseas sales either, they’ll just buy from smaller website from retailers willing to ship to Australia and they’ll probably be retailers who don’t even know that they should be collecting GST on behalf of the Australian revenue.
Putting in place a tax regime with the expectation that compliance will be as low as 25% is crazy. It’s reminiscent of the US ‘Use Tax’ which Americans are supposed to pay when they buy goods tax free from another State. It also begs the question that if the Australians only expect a compliance rate of under 30%, is the same true of the UK government and is the Chinese VAT compliance many times worse than any one has hitherto thought?