The Government Is Clueless About eBay And Online Retail

Source: eBay

A few years ago, after much whining and hand-wringing by olde worlde retailers, the federal government began looking into changing the law around GST collection from overseas retailers on purchases of under $1000. Even though it would cost more to collect the GST than the tax would raise the government wants to kick start this exciting new initiative (not) on 1 July 2017. But the impact could suck big time as eBay suggests they might block overseas retailers from their marketplace.

Here's how I see the government's GST collection proposal. I'm a Melbourne boy. One of our local institutions is the Victoria Market. Stall holders rent space in the market and sell their wares - anything from fresh fruit and veggies, to sides of beef, to clothes to phone cases. The stall holders are responsible for managing their own tax affairs - like filling in a BAS and paying GST (assuming they have more than $75000 revenue and are obligated to do so).

eBay is like the Victoria Market. It's a marketplace that charges rent, in the form of a cut of all transactions, for resellers to peddle their wares.

But the government seems to think eBay is a retailer and they should be collecting GST and filing a BAS each month or quarter, for the sales made by stall holders. This is covered in an explanatory memorandum that states

This measure imposes some transitional and ongoing compliance costs upon suppliers (principally those operating outside of Australia), redeliverers and electronic distribution platforms for supplies of low value goods that are purchased by consumers and are delivered to Australia.

The key words are "electronic distribution platforms". eBay, as an electronic distribution platform would be obligated to collect GST on low value transactions.

So, what's eBay's response to this. Simply, they said they'll pack their tent up and leave. They will block overseas resellers from Australian eBay customers rather than face the hassle of collecting GST for overseas resellers. Amazon has made similar statements as well.

This would be a very poor outcome for customers - but probably one that would make Gerry Harvey smile from ear to ear.

I understand how companies that operate an online store that sells directly to customers should be required to collect GST and fulfil local tax obligations. But surely it's up to sellers to collect GST. Of course, by treating all eBay resellers as a collective, the $75000 threshhold of registering for GST is easily reached whereas small resellers probably wouldn't qualify.

In my view, the government's decision to compel overseas retailers who have a direct retail presence in Australia is reasonable. It's hard to justify selling products and services to Australian customers but not paying local tax. However, forcing platform providers like eBay to collect GST makes little sense. Sure, eBay ought to pay tax on its Australian income but I don't think they should be covering the GST obligations of online traders.


Comments

    I see a great example of the Law of Unintended Consequences about to descend upon us.

    It's been said many times before, people have been driven to buy overseas because of the pricing here, regardless of GST.

    An example, I recently bought a Neato Botvac Connected from Amazon UK for AU$612. That included about $72 in shipping costs. Harvey Norman and Myer price here? $1599. The fact I saved a few bucks on the GST wasn't the reason I bought it overseas obviously. Even with GST its still well below half what they are asking.

    How exactly do they justify that $1000 increase in price?

    On the other hand, if eBay and Amazon stopped selling to AU altogether, that's probably a better outcome than Mr Harvey could have dreamed of.

      a better outcome than Mr Harvey could have dreamed of

      And yet, he has gone very quiet. Almost as if he was happier having something to complain about...

    Everything this government touches turns to sh!t. I'm still reeling from the tens of billions of dollars spent to deliver me a slower internet connection than I've had for the last three years. It's not that the libs couldn't organise a piss-up in a pub. They can't organise anything. Well done to anyone who gave their vote to the Muppet Party.

      Yes, this is just another spectacular example of how utterly clueless the Coalition are.
      They show wilful ignorance in refusing to listen to IT experts.
      They only want to hear their own voices and look after Rupert, Gerry and other wealthy mates. Then they wonder why the average voter is are angry.

    It is further complicated by the fact that many eBay sellers (here and overseas) are hobbyists (i.e. not running a business in the ATO definition) and therefore are not required to collect or charge GST.

      Once upon a time, eBay was ALL hobbyists.

      I wish eBay would go back to being less commercial, and more small-time trades and collectibles. But those days are gone, sadly.

      Nowadays, even whole department stores like Myer, sell on eBay. One can argue that eBay have brought all this tax attention onto themselves, through their desperation to transform into a one-stop online commercial shopping hub, instead of being the "online garage sale" auction site they were originally.

    Great points folks. The government, if they can get Ebay to collect the GST, gets a win as every transaction will attract GST. Hobbyists won't care as Ebay will be doing all the heaving lifting. So a $5 sale makes some GST. I am struggling to see how this has a positive side.

    It shouldn't surprise me but unfortunately it boggles the mind about how this government is hell bent on making themselves look like idiots.

      They have no better competition.

      Seriously, where is the better alternative?

      Labor had the right idea for the NBN but they trashed everything else in the process and wreaked the coffers.

      The Greens are even worse running from soap box to soap box; making noise but fail to stand up to any test of intelligence.

      And finally we have the independents that are riding on the easy protest votes they get when many don't want to vote for any of the majors.

      So the Coalition are anything but idiots. They know they have no better competition and are simply calculating the minima effort they need to put in just to stand one inch higher than the second worst option; Labor.

      But to the topic at hand; it would not surprise me we will soon here that the measure is introduced but "due to unforeseen complications" it cannot be effectively enforced.

      And even if enforced and all the online retailers, etc., comply, it is not going to change Australia's spending habits.

      The guest user "No fault of the GST" give one classic example of why people shop online but I'm of the other example; the product in question just doesn't exist here.

      It might also explain why Gerry Harvey has gone quiet; he never dreamed this would happen because he has been using it as a convenient platform to trigger guilt trips in customers to keep coming to his stores.

        The Labor Party you are talking about was hamstrung by a megalomaniac that was eventually ousted by a woman. Who in turn, was elected in her own right to a hung parliament and then was constantly snarled and barked at by a slathering attack dog called Rabbid or something. You can't look at that period in Politics and call it optimal, as for the current abortion, they went through a similar thing, except the woman in this case, has a tiny little set of balls. The Labor Party has always been the Peoples Party and the Liberal Party has always tried to take as much money as it can from those who can least afford it and then give it to the Banks. This may be a simplistic view in your opinion, but in my opinion, if it Swims, Quacks and looks like a duck, then..

          The Labor Party you are talking about was hamstrung by a megalomaniac that was eventually ousted by a woman

          Actually, the ousting was done by the Labor caucus who also seemed to think we had memories less than 18 months long and though putting Rudd back was a good idea.

          A good idea that is the same as putting lead back into water pipes!

          Who in turn, was elected in her own right to a hung parliament and then was constantly snarled and barked at by a slathering attack dog called Rabbid or something

          Abbott and I'll let you have that one because it was true. Her claims about Abbott being a misogynist though; completely false but she rode it to shut him up.

          The Labor Party has always been the Peoples Party and the Liberal Party has always tried to take as much money as it can from those who can least afford it and then give it to the Banks

          If that is the case when why did Labor plan to try and fund Gonski via cuts and converting scholarships into loans?

          You are entitled to exhibit double standards but that doesn't change the facts you are trying bury by romanticising Labor.

          This may be a simplistic view in your opinion, but in my opinion, if it Swims, Quacks and looks like a duck, then

          Except you are looking at a walrus with a yellow jacket on its face and David Collins if off frame with a megaphone.

            I wasn't going to bother replying because I knew you would put your spin on it, however what made me crack up is that you actually corrected by spelling of the attack dogs name, you clearly couldn't see my definition of that idiot as the joke he was. Love it.

              I wasn't going to bother replying because I knew you would put your spin on it

              Not my spin; those are the facts.

              Unless you count the David Collins and lead pipe hyperbole in which case, yes.

              If anything, the spin is coming from you.

              The Labor Party has always been the Peoples Party

              You keep telling yourself that.

              There is no denying that Abbott basically did himself in (letting Credlin pull the strings and even believed Gillard own rhetoric about himself) but I'm not going to delude myself into think Labor are for the people.

              The parties serve a function and it is all about trying to find the one that will cause the least damage. Saying any of them are for the people is a fairy tale and out right fiction.

              EDIT: Language.

              Last edited 19/04/17 9:44 am

            Her claims about Abbott being a misogynist though; completely false but she rode it to shut him up.

            Except he is a misogynist, I mean seriously he thought it was a good idea to make a man the minister for women, and to make that individual a misogynist too.

          The Labor Party has always been the Peoples Party

          The labor Party has always been the Unions Party. Fixed.

    Oh, that's just the tip of the iceberg. There is of course GST exempt items and entities that each and every retailer, worldwide, who sells to Australia, will need to be aware of. Is the product a GST free food item? Is is a device primarily used for medical purposes? Are you selling to a business or a consumer?

    Of course, setting up a system to collect, account and report on GST for a foreign government is no small task either. Companies the size of eBay and Amazon have massive accounting systems in place, with hundreds of moving variables for each and every transaction, any change requires considerable planning and testing to ensure things are working as intended. These changes, naturally, don't tend to happen very quickly. They need input from multiple parts of the business, touching several different IT systems, and requires new processes in place to handle it all. A change like this, for a local large size business would take upwards of a year. Just look how much time was needed to put in place the GST originally.

    There are also unanswered questions about the logistics side of things. Talk is that parcels will be stopped if the GST hasn't been paid on them. If that's the case, how is it being communicated that GST has been paid on a specific article? Is that something the logistics companies are now collecting and reporting? They'll need (a lot of) time to put in place new systems for capturing and communicating this data to and from the appropriate people.

    Of course, as this legislation hasn't passed parliament yet, there's no actual advice from the ATO, on the tax implications here. No details on how businesses should register for this, and certainly not in their local languages.

      Of course, as this legislation hasn't passed parliament yet

      You sure? I though it was passed when Hockey was still Treasurer and was due to commence this year.

        No, it's at the Senate subcommittee now, eBay's statements included in this article was from their submission to that subcommittee. They're due to have their findings back in May, I believe, after which it will be voted on in the senate.

          .....Urg, thanks for the heads up.

          Not to get too far off topic but given the level of BS from all sides I am seriously wondering if it is good for my brain to try and keep up anymore.

    Ludicrous! Where is the (Governments) General Service? The sellers are based overseas and are not Australians. The postage is paid and covered so what right does the Government have in taking something they are not entitled to?

    Come on admit it, this government is just clueless. They said the last lot were bad, these guys are worse, their infighting is worse, they spend more and they lie more. So much for the adults just a different better off set of children.

    Or is it you that doesn't understand taxation? How does everything get paid for ... health, defence, welfare, etc. etc. A massive and growing tax hole cannot be sustained without taxes making up the difference. Instead of taxing the basic, surely it's better to tax discretionary spending? And it's fair to tax ALL spending by EVERYONE.
    But I would have thought that, rather than ebay, the ones to collect and deliver GST would be the payment gateways ... Paypal, Visa, etc.

      Same problems exist. How do you classify products that are being sold, and who they've been sold to, by a separate 3rd party that has no information on the transaction that has occurred?

      I don't doubt that this is a problem every country in the world is facing, and a system does need to be designed. But for Australia to create it's own clusterfuck of a system as pointed out by the eBay letter attached to the article, potentially drive away online marketplaces, and potentially decrease competition instead of adopting to an international standard that OECD is already working towards is stupid.

    Pointless bickering about which political party is the worst. Nothing gets through parliament without majority agreement in both houses. People like Gerry Harvey and Graham Burke have had the ears of policy makers for the better part of the decade. And they've been telling the same tale of doom and gloom that no pollie wants to hear. The one that goes "Online competition is bad for our outdated business models and will force us to close our doors and cost honest Aussies their jobs." I guess there's finally enough idiots in Canberra who believe the lie and think this will drive 'innovation' by essentially giving the monopoly holders exclusive trade rights within our borders.

    This isn't going to make me buy anything from that whiny little princess Gerry Harvey.

    Harvey Norman has garbage stock, pathetic customer service and the more he whinges about online retailers without actually making an effort to compete himself, the less I'm inclined to have my money anywhere near his business.

    I run a small manufacturing business and bring material from overseas via post.
    Being able to purchase goods under the $1000 threshold is one advantage that I have against my competition who all import finished product similar to mine and sell cheaper. Gerry Harvey is typical of the rich, "too much money is not enough"
    As far as governments go they have all systematically and deliberately dismantled Australian manufacting for the last 40 years.

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