The Government Is Clueless About eBay And Online Retail

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.

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