Tuesday, 23 February 2016
Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016; Second Reading
The world economy is never still. It continues to be reinvented and redefined. We have seen the industrial revolution come and go, and the emergence of the new economy. Services and other intangibles are now the demand of the day.
Australia's GST system has been in place for 15 years. Since its introduction in 2000, there have been a significant number of changes in Australia and throughout the world. One of the most notable changes has been in the growth in cross-border supplies of services and other intangibles. This has radically changed the economic playing field. We need a tax system that understands the changes of the times—a system which incorporates the growing digital economy: simple, fair and growth friendly. That is the tax system the coalition wants to create.
This bill enables us to future-proof our tax system, allowing us to repair tomorrow's problems today. Schedule 1 and 2 both contain measures that both modernise the GST and address the challenges we currently face. When the GST was introduced in 2000, cross-border supplies of services and other intangible transactions were fairly unusual, especially for consumers. Now, at the click of a button or the tap of a screen, consumers can purchase music, films, eBooks, apps and software, along with a slew of other intangibles. Local businesses should not be disadvantaged. Walking into the local bookstore should be no different to buying a book online. We want our small businesses, our local businesses, to have the same chances as those that are online. We want a tax system that paints all businesses with the same brush strokes.
In the growing and changing economy it is important that we have a tax system that is prepared and ready for the challenges of tomorrow. Cross-border supplies now form a large and growing part of Australian consumption. The importance and now commonplace nature of these types of transactions highlights that the GST was designed with a focus on Australian-based rather than cross-border supplies. For cross-border supplies that are for private or domestic use, the GST often does not apply to supplies made by nonresidents to consumers in Australia.
Increase in cross-border transactions and the growth of the digital economy has led to an expanding area of consumption which is now outside the scope of the GST. This harms the integrity of the GST tax base and can disadvantage local suppliers. Amendments made by schedule 1 update the GST law to ensure that GST applies consistently to all suppliers of digital products and other imported services made to Australian consumers. The government will require overseas vendors to collect and remit GST on the sale of their digital products and services to consumers in this country. Overseas vendors and multinationals who sell digital products like music, apps, and other intangibles will be required to register, collect and remit GST on their sales to Australian consumers. This ensures that Australian businesses selling digital products and services are not disadvantaged relative to overseas businesses that sell equivalent products in Australia.
Schedule 1 removes an anomaly that has existed in the GST for a while. The tax system we inherited from Labor clearly failed to keep up with the times. Although the internet and the digital economy have been around for some time, it is this government, the coalition government, that has taken action on these matters. Our government is determined to reform our tax system and ensure that it fits with the changing times. Schedule 1 is the product of our government's work with international tax authorities.
Australia has been working with the G20 and the Organisation for Economic Co-operation and Development, or OECD, to address weaknesses in the current rules. The OECD's Base Erosion and Profit Shifting report Addressing the tax challenges of the digital economy highlighted the impact of the evolution of technology. It is noted that technology has dramatically and drastically increased the ability of private consumers to shop online and the ability of businesses to sell to consumers around the world without the need to be present physically or otherwise in the consumer's country. It further noted that this more often than not results in no GST being levied at all on these sales and a negative and adverse effect on countries' GST revenues.