Why Amazon, eBay and ASOS are fighting the government hard on its plans to scrap the GST threshold for online purchases

Online purchases of less than $1000 made from overseas suppliers will be subject to the goods and services tax (GST) from July 1, but overseas retail giants are now fighting it out over how and when the policy should be implemented.

Global shopping marketplace eBay has said the policy could force it to prevent Australians from buying from its foreign sellers, while Amazon is arguing that logistics providers should be responsible for collecting and processing the tax.

But some smaller local operators say the specifics of the collection processes don’t matter as much as the policy’s aim.

In August 2015, federal and state government treasurers agreed to scrap the $1000 low-value purchase threshold — which meant small online purchases from overseas companies did not incur the GST — after sustained campaigning from small retailers, which argued the failure to collect the tax placed local businesses at a significant disadvantage to the likes of Amazon.

The government passed legislation for the change in February this year and with the law set to apply from July, retail and business groups have had their say on the rollout of the policy through submissions to the Senate Standing Committee on Economics, which is due to report on the policy next month.

International retailers warn of effects on consumers

In submissions to the committee, retailers including Amazon, ASOS and eBay have taken aim at the government’s policy on a number of fronts.

The first of these is that the overall policy fails to achieve the government’s aim of raising GST revenue, because it assumes online marketplaces will comply with the policy and that businesses will not move to other parts of the internet to circumvent the law.

“The way this Bill is drafted will drive overseas sellers off the kind of cooperative large-scale, Australia-based marketplace platforms onto the opaque parts of the Internet and search engines,” eBay suggests in its submission.

Secondly, overseas retailers disagree with the idea that they should be responsible for complying with the collection and processing of GST payments, instead saying this should be the responsibility of other parts of the supply chain, like logistics and delivery services, They believe it’s too much to ask multinationals to put the frameworks in place for collection so soon.

Online retail giant Amazon claims in its submission the policy will create an “inherent disincentive” for online retailers to comply with the law, and asks the committee to consider hand-balling the collection responsibilities to Australia’s logistics providers, like Australia Post.

The third key argument against the new laws is that it could stop international businesses from wanting to engage with Australian customers. For example, in its submission to the committee, eBay goes as far to suggest that the policy could regrettably lead to the company “prevent[ing] Australians from buying from foreign sellers”.

“This solution would not even represent a win for bricks-and-mortar retailers, because Australians would still find ways to buy online … this appears to be the most likely outcome at present,” the company said.

In its submission, fashion retailer ASOS said it is concerned the timeline for implementation is too tight and could place a burden on online retailers, and the policy will lead to what was in essence “two different systems” of tax.

However, it’s not just multinationals shouting out in protest. Closer to home, the “Keep Shopping Open” campaign, headed up by Disrupt Sports chief executive Gary Elphick, warns the change in GST collection models could affect small Australian businesses in the long term, suggesting that other nations will start imposing new taxes on Australian businesses selling into overseas markets in retaliation.

“It would be awful for our staff to be charged to collect tax on behalf of those countries we sell into around the world, just because of the administrative burden,” Elphick told SmartCompany this morning.

The Keep Shopping Open campaign is concerned the administrative burden on the tax is too complicated and will limit consumer choice, while also not being an effective policy for raising revenue. The campaign was launched by Elphick but is supported by partners, which he said could not be disclosed.

Elphick cites the fact that it costs $60 to collect GST on a transaction, meaning for purchases of under $600, the government would not break even. One alternative would be to have the GST threshold apply to purchases of less than $600, he suggests.

“I think that’s a great idea, bring it to a level where it’s possible for the government to collect it [and make revenue],” Elphick says.

Read more: Why Amazon won’t kill retail in Australia 

It’s about more than levelling the playing field, say local retailers

However, both small business groups and the Australian Retailers Association (ARA) have long held the view the GST policy will help address the gap between multinational retail giants and local operators, who already struggle to match companies on price before having to add another 10% in tax to items.

“This reform is a longtime coming, the retail sector will look very poorly on any delay caused to the implementation and those individuals causing the delay,” the ARA said in its submission.

Booktopia co-founder and chief executive Tony Nash says scrapping the threshold won’t necessarily level the playing field for smaller operators, but that’s not the only purpose of the policy. He says closing the GST loophole will go some way to helping both local retailers and the budget bottom line.

“If you look at it as a higher level, it’s not about levelling the playing field, though it will go some way,” says Nash.

“For us, it will be helpful, but at the same time, everyone knows the overseas retailer is still often [offering] more than 10% less than the local retailers.”

However, the purpose of the policy was also always about ensuring the government could recoup revenue from those doing business in Australia, says Nash.

“It’s about all of [the money] is going offshore and the rest of us are trying to struggle here, and we pay our GST, but there’s never enough money going around to fund things,” he says.

“We all want to know that we’ve got hospitals, that we can have roads. It’s about just making sure there’s a tax model where should stuff be sold in Australia, there’s a way of funding all of our national projects.”

The Senate committee will hold a public hearing into the legislation in Melbourne on Friday.

Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on Twitter, Facebook, LinkedIn and Instagram.