Australia has decided to scrap a tax exemption for imported goods bought online.
Australia levies a ten per cent “goods and services tax” (GST, think VAT, British readers and sales tax in North America) on wide range of goods, but currently exempts imported items valued at less than AUD$1,000 from the tax. The nation's now decided that limit should go for online purchases.
The change is expected to have two effects, one of which is to make it harder for online services such as Netflix to say their services are delivered offshore and therefore exempt from GST. Google does likewise with AdWords. Going after the two companies will be a popular policy as it widely believed large technology companies aren't exactly trying their hardest to pay tax in Australia. Australia's State governments won't mind either - GST is collected by the Commonwealth but then doled out to the States.
The second hoped-for effect is to make life easier for Australian retailers, who complain they cannot match offshore players on price because of the $1000 exemption.
Australian treasurer (think chancellor or treasury secretary) Joe Hockey says Australian tax officials will visit the world's e-tailers to ask them to charge GST and then send it to Australia. Most are beyond Australia's jurisdiction, so won't be compelled to comply. Should e-tailers choose not to give Australia a hand, things will get interesting because the last time the nation investigated this idea its Productivity Commission found that checking packages at the border would cost more than the amount of tax that would be recouped.
Hockey insists this new approach will result in cash reaching the nation's coffers, but concedes it will be easier to have large concerns like Amazon.com comply than smaller players.
The treasurer said the change will come into force on July 1st, 2017. ®