GST carve-up to be examined by the Productivity Commission


Michelle Grattan, University of Canberra

The government has ordered the Productivity Commission to review how the GST revenue is sliced up, setting the scene for a new round of hostilities between states over what they get from the tax. The Conversation

The review, to report by the end of January, follows long-standing pressure from Liberals in Western Australia, which currently loses out heavily from the present formula. There is now deep concern, after the Barnett government’s wipeout, that a number of federal seats in that state could be lost at the next election.

Under the Grants Commission’s formula, WA in 2017-18 will get only 34% of the average national per capita distribution of the GST.

The new WA Labor premier, Mark McGowan, welcomed the review, saying he had pressed for it. He said action was needed as soon as the report was received.

But South Australian Labor Treasurer Tom Koutsantonis said that after the WA rout of the Liberals, the federal government wanted “to take GST away from South Australians and give it to Western Australians”.

Expert sources said potential winners and losers from the PC review could not be predicted.

The outcome of the review would be taken to the Council of Australian Governments (COAG).

Treasurer Scott Morrison said the commission had been asked to inquire into the impact on the national economy of the current system of horizontal fiscal equalisation (HFE) which underpins the present distribution.

Under this system, the Grants Commission recommends a carve up to give each state the capacity to provide its citizens with a comparable level of government services.

“In recent years, views have been put to the government that the current approach to HFE creates disincentives for reform, including reforms to enhance revenue raising capacities or drive efficiencies in spending, arguing that any gains from reform are effectively redistributed to other states,” Morrison said.

“It is important for Australia’s future prosperity that our system underpinning Commonwealth-state financial relations supports productivity, efficiency and economic growth across the country.”

The federal government has been topping up WA’s money and confirmed that it will continue to do so in next week’s budget, by providing it with some A$226 million for infrastructure.

One closely watched area in the budget will be health, with the government expected to announce a staged lifting of the freeze on Medicate rebates, probably over three years and starting with GP consultations for those covered by concession cards.

Labor is pre-emptively seeking to raise the bar higher than the government will meet. Bill Shorten and health spokeswoman Catherine King said in a statement that if the government “doesn’t drop every single health cut in full”, including the entire Medicare freeze from July 1, it would be “more proof that they can’t be trusted on health”.

Meanwhile, Education Minister Simon Birmingham is setting the scene for the imminent announcement of the university funding policy by releasing a study on the cost of delivery of higher education, commissioned by the government and undertaken by Deloitte.

It showed revenue rose faster than costs – between 2010 and 2015 the average costs of delivery per student increased by 9.5%, while per student funding growth was 15%.

“This independent analysis speaks for itself: funding for our universities is at record levels, but it has grown above and beyond the costs of their operations,” Birmingham said.

“Australian taxpayers gave universities around $16.7 billion in 2016 alone or around $19,000 per student, which is more than ever before. In the context of a tight national budget, the Turnbull government is focused on getting the best return for every taxpayer dollar invested,” Birmingham said.

Birmingham has a meeting with university leaders and business and student representatives on Monday.

With housing affordability a key item in the budget, there is speculation one measure could be a tax break for first home buyers’ savings.

In its pre-budget monitor on the economy Deloitte Access Economics says the economic news is getting better – reinforcing the point Morrison made last week.

“National income is jumping by $100 billion this year, equalling the gains of the previous two-and-a-half years in one gulp,” it says, adding that the good news is mostly in profits. But wages growth remains low, restraining the growth in revenue.

Deloitte projects a deficit of $38.3 billion this financial year, $1.8 billion worse than in the official mid-year budget update, and (on the assumption of no further policy changes) the deficit falling to $27.5 billion next financial year. That would be $1.2 billion better than projected in the mid-year update.

Deloitte doesn’t expect Australia to lose its AAA credit rating in the near term. “Were it to happen, the initial trigger may actually be the debt of families rather than that of government,” it says. “In recent months Australian families passed those of Denmark to move into second place as the world’s most indebted [behind the Swiss].”

https://www.podbean.com/media/player/r88ra-6a1eda?from=yiiadmin

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

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Imposing GST on low-value imports doesn’t level the playing field


Kathrin Bain, UNSW

The government wants to extend GST to imported online goods under A$1000, effective from 1 July 2017, with Treasurer Scott Morrison stating it will “establish a level playing field for our domestic retailers”. But the proposed legislation doesn’t do this. Rather, it unfairly imposes GST on goods purchased from overseas sellers, that wouldn’t be subject to GST if purchased from an Australian seller. The Conversation

The government also hasn’t cleared up how the collection will be adequately enforced. Without appropriate enforcement, collecting more revenue from this tax seems unlikely.

Currently, low-value imports (those with a customs value of A$1,000 or less) are exempt from GST. If the legislation is passed, overseas vendors who sell more than A$75,000 of low-value goods to Australian consumers would be required to register for GST, and collect and remit GST on low-value goods to the ATO.

Those imports will continue to be stopped at the border with any GST, customs duty, and associated fees paid to Australian Border Force by the importer before the goods are released.

For sellers of low-value goods it will mean that an overseas supplier of both low and high value goods will be subject to two separate tax regimes. The requirement to collect GST will apply only to low-value goods.

Online marketplaces and mail forwarding services

The new law will also apply to online marketplaces such as eBay and “redeliverers” – businesses that forward goods to Australia from overseas companies. For goods purchased through an online marketplace, the marketplace rather than the seller will be treated as the supplier. Similarly, if low-value goods are delivered to Australia by a redeliverer, they will be considered to be the supplier for GST purposes.

While extending the GST to these goods is meant to level the playing field between overseas and Australian vendors, treating the online marketplace or mail forwarder as the supplier of goods is inconsistent with the treatment of domestic transactions.

As eBay has stated in their submission to the Senate Committee: “eBay is not a seller. eBay is a third-party online marketplace that simply connects buyers and sellers”.

For Australian vendors who sell items on eBay, it’s the individual seller who is responsible for collecting and remitting GST on products they sell (if they are required to be registered). A seller who uses eBay, but isn’t carrying on an enterprise or does not meet the A$75,000 turnover threshold, isn’t required to be registered and would not be required to collect GST on their sales.

However, the proposed legislation does not treat overseas vendors in this way, by treating online marketplaces and mail forwarding services as the supplier of goods. The Treasurer stated that:

Including online marketplaces ensures that only a limited number of entities need to collect the GST, rather than the multitude of small, individual vendors making supplies through these online marketplaces that compete with Australian retailers here in Australia.

With all due respect to Scott Morrison, he seems to have missed the point that small, individual vendors should not (if their turnover of low-value goods into Australia is less than A$75,000) be required to collect GST merely because they use an online marketplace.

EBay has gone as far as stating in their submission that: “Regrettably, the Government’s legislation may force eBay to prevent Australians from buying from foreign sellers”. This is because they would not be able to comply with the requirements imposed under the new legislation.

Compliance concerns

Despite the legislation being intended to come into effect on 1 July of this year, it is still unclear how the new system will be adequately enforced.

At the moment, information displayed on international mail declarations doesn’t indicate whether the overseas supplier is registered (or required to be registered) for GST. It also doesnt say whether GST has been collected, and whether it is being correctly remitted to the ATO. Even if this information was readily available, it’s not clear how the ATO would deal with non-compliant entities.

If it was determined that GST had not been charged and collected by the overseas supplier of the low-value goods, there is nothing in the proposed legislation that would allow the GST to be collected from the importer (instead of the supplier) when the goods enter Australia. However, attempting to enforce an Australian tax debt against a non-compliant overseas vendor would be a complex, costly, and likely fruitless endeavour.

Consumer advocate group Choice has expressed concern that the government would use powers under the Telecommunications Act to block the websites of non-compliant entities. However, Scott Morrison has indicated that the government has no intention of using this power.

Concerns regarding enforcement have been echoed in a number of submissions, including the Taxation Institute of Australia and Amazon. Both highlight the fact that lack of enforcement may simply encourage Australian consumers to purchase goods from non-compliant overseas entities that are not charging GST.

By treating online marketplaces and mail forwarding services as the supplier of goods, the proposed legislation does not treat overseas vendors in the same way as domestic vendors. The tax will only be effective if the system for collecting GST on imports can be adequately enforced. Without appropriate enforcement, high levels of compliance seems unlikely. A lack of compliance will continue to leave Australian retailers at a disadvantage, with only minimal increase in GST revenue.

Kathrin Bain, Lecturer, School of Taxation & Business Law, UNSW

This article was originally published on The Conversation. Read the original article.