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eBay threatens to block Australian customers in response to ‘Amazon’ tax

April 20, 2017

eBay threatens to block Australian customers in response to ‘Amazon’ tax

Misa Han, The Australian Financial Review, 17 April 2017

Online marketplace eBay is threatening to geoblock Australian customers to stop them from buying from overseas sellers if the government goes ahead with a 10 per cent GST on all goods imported into Australia on July 1.

In a submission to the Senate inquiry on the proposed tax, eBay said the platform may have to stop Australian buyers from purchasing from overseas sellers.

“Regrettably, the government’s legislation may force eBay to prevent Australians from buying from foreign sellers. No tax would be paid to Australia and none would be owed. It would raise no revenue, deny Australians access to choice and lessen price competition,” eBay Australia and New Zealand vice-president Jooman Park wrote in the submission.

“This solution would not even represent a win for bricks and mortar retailers, because Australians would still find ways to buy online. They would do so direct via dot.coms without paying GST and they would lose the confidence they current enjoy buying from eBay with the advantage of its trusted seller ratings. This appears to be the most likely outcome at present,” he said.

The “Amazon tax”, announced as part of last year’s budget, is due to hit consumers with 10 per cent GST on all goods that are imported into Australia starting from July 1 and was introduced following a long-running campaign by local retailers, including Gerry Harvey, for a “level playing field” for Australian retailers.

Currently, imported products such as cosmetics, clothing and books worth less than $1000 are GST-free. The government expects the tax to raise $300 million in the next three financial years.

Under the proposed laws, “electronic distribution platforms” like eBay would be treated as the supplier of the products and would be responsible for paying GST on behalf of overseas sellers.

‘Less harmful to block imports altogether’

eBay said in its submission most online marketplaces will require at least “several years” to develop the systems in order to comply with the new laws.

However, it said the cost of introducing the system changes for Australia was likely to too high and it would be easier to geoblock exports to Australia.

“However, a far more likely scenario is that the costs of compliance for one single country will outway [sic] any possible benefits for these internationally operating marketplaces and it will, therefore, be less harmful to block imports altogether,” Mr Park said.

K&L Gates tax partner Matthew Cridland said given the bill was only introduced in February, the July 1 start date will give multinational companies insufficient time to come up with a GST collection mechanism.

“This will be insufficient time for international companies to update their systems to comply with the reforms, contributing to low compliance,” he said.

He said there may be higher enforcement by multinational companies like eBay if Australia waits until other countries introduce similar laws so they can update their platform globally.

“There will likely be higher compliance if global companies deal with similar laws in multiple large jurisdictions. This will also allow tax treaties to catch up so that there is greater mutual co-operation around enforcement and compliance,” he said.

eBay said it was a “misconception” to think online marketplaces are equipped to handle the complexity of GST collection.

“This is wrong and completely ignores the way third party online marketplaces function. Compliance with GST collection and remittance rules will require a very significant investment of human and financial resources in product development and administration,” Mr Park said.

‘Anti-consumer and anti-free trade’

The proposed “Amazon tax” sparked criticism from other stakeholders, including the American Chamber of Commerce chief executive who has labelled it “anti-consumer”, “anti-free trade” and “not consistent with the government’s pro-growth innovation agenda” because it hinders Australian consumers from accessing the most competitive services available and acts as a disincentive for some foreign companies to do business with Australia.

Amazon said in its submission it supports scrapping the current $1000 GST threshold, so all goods imported into Australia are subject to the 10 per cent GST and there is a “level playing field” for all businesses.

However, Amazon said under the proposed model, non-compliant sellers and online marketplaces will be able to ship parcels to Australia at lower prices, which will encourage Australian consumers to buy from less reputable overseas vendors at increased risk.

Amazon said Australia Post and express carriers such as FedEx and DHL, rather than online marketplaces, should be responsible for collecting GST from overseas sellers.

It said while this would require changes to IT infrastructure, it was likely to be “less burdenson overall” because systems are already in place for processing goods above $1000.

Alibaba, in its joint submission with eBay and Etsy, an online marketplace for bespoke products, agreed with Amazon that GST should be collected by logistics providers.

Alibaba said in the submission online marketplaces that just provide listing services should be excluded from the Amazon tax, as they do not set the price of goods, handle the goods or have knowledge of the flow of the physical goods.

Sources said Alibaba was also considering geoblocking Australian consumers from buying from overseas sellers using the AliExpress, however an Alibaba spokesman said it was “premature” to comment on the issue.