Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

As we debate the Treasury Laws Amendment (GST Low Value Goods) Bill 2017, a significant transition is occurring in retail across advanced countries. In the United States, Macy's is due to close 100 stores and sack 10,000 employees. It will soon have nearly a fifth fewer stores than it did just a year ago and is anticipated to have to cut even further. As one analyst from Morgan Stanley notes, 'this is just the start'—in the future, Macy's expected to shrink even further. This is just one of the many traditional bricks and mortar retailers that is shrinking in the current environment. A principal reason for this is the rapid growth of Amazon, now the world's fifth most valuable listed company, which accounts for about half of e-commerce in the United States. Not only is Amazon large, but it is projected to grow significantly larger. Morgan Stanley expects its revenue to rise from $136 billion last year to more than half a trillion dollars by 2025, which would be the most rapid growth in corporate history. The success of Amazon is based not only on its distribution centres but also on its use of robotics in packaging—the Kiva robots—and on rapid shipping, with Prime now offering two-hour shipping as well as its standard two-day shipping.

Amazon has announced that it is going to enter Australia sometime in the near future, which will again affect the Australian retail environment. Australians already do a significant share of their shopping online. According to a recent report by National Australia Bank, growth in online retail sales accelerated in March at 0.8 per cent, meaning that Australians spent $22 billion over the previous 12 months in online retail—about seven per cent of the traditional bricks and mortar retail spending. Breaking that spending down across online domestic and online international sales, NAB estimates that, of the growth, about nine per cent has been domestic and about nine per cent has been international, and about 80 per cent of total online spending continues to be domestic.

The other challenge facing the Australian retail environment is the fragility that record high household debt levels have created. In a speech last month, Reserve Bank Governor Philip Lowe noted:

In earlier periods of rising housing prices, the household sector was withdrawing equity from their housing to finance spending. Today, households are much less inclined to do this. Many of us feel that we have enough debt and don't want to increase consumption using borrowed money.

That debt exposure is a challenge for the Australian retail sector. The traditional retail sector is facing tough times, with significantly tougher times yet to come. It is vital that we acknowledge that context as we debate this bill. As others in this debate have noted, if we were starting from scratch today, knowing what we know about e-commerce, the GST would not have been designed with a $1,000 low-value threshold. When Labor were in government, we commissioned work from the Productivity Commission to look at lowering the GST low-value threshold on international imports. We made it clear that, if it raised more revenue than it cost, we would be open to reform.

The government assures us that this reform does that. But, as I will outline, Labor has significant concerns about the way in which the government has bungled the attempted implementation of this attempted reform. We are now debating changes which, if they were to pass the House unamended, would take effect in a matter of weeks. It is extraordinarily unusual to be debating tax changes of any scale which take effect in a matter of weeks, but it is all the more unusual when what Australia is seeking to do is lead the world. There is nothing wrong with leading the world and being the first in the world to make a change, but it ought to give you pause when you are attempting to lead the world by getting large online retailers to change their behaviour with just a couple of weeks notice.

Australian retailers are right to say that they are being placed at a cost disadvantage by the current GST low-value threshold. But it is important that we get the reform right. The model the government has put forward is a vendor registration model. This requires overseas suppliers which have an Australian turnover at a platform level of over $75,000—including the electronic platforms eBay, Amazon, AliExpress and the like—to register and charge GST. The analysis of this which has been done by the Senate Economics Legislation Committee—and I commend Labor Senator Chris Ketter for his work on that committee—has uncovered significant concerns about the workability of this model. The Senate inquiry found that Treasury expects a compliance rate of 25 to 30 per cent in the third year of operation. On the government's current timetable, by mid-2019 there will be around three-quarters of transactions which do not fall within the net. And when the system hits maturity, which is estimated to be in the fiscal year 2022-23, the government anticipates a compliance level of just 54 per cent. In other words, at its best, this current model is estimated by the boffins in Treasury to miss nearly half of the low-value imports.

The Senate inquiry made it clear that getting other countries to enforce this is going to be a challenge—whether it is the United States or China. We are concerned by the submissions made by those who will need to implement the model that it is not workable. Submissions from eBay, Alibaba and Etsy were critical of the government for putting in place a model which effectively requires them to collect tax in a way that they have not done in the past. Amazon has noted that while in the United States they currently collect state sales taxes for products sold by Amazon when they are shipping their own goods, they do not currently collect state sales taxes in the same way for Amazon Marketplace—that is, where they are acting as a platform reseller. That is what the government is intending to do in this change.

There have been concerns from freight carriers and express carriers about a system that requires the collection of business numbers and vendor registration numbers. They have said that would create complexity, unnecessary delays and increased costs. There have been concerns from peak consumer group Choice about the impact on consumers and, as the Senate committee has unanimously acknowledged, the government's timetable is too short. Coalition senators and Labor senators called for a delay in the start date of 12 months, until 1 July 2018, to ensure that the problems in the model could be sorted out. It is not just Labor senators; it is coalition senators as well who want a delay so as to get this right.

Labor's view is that we should not just put in place a delay, but we need a rigorous independent assessment of the model. The government tell us that their model is perfection personified, that the best we can hope for is a model that, when it ripens, will still miss 46 per cent of low-value goods transacted and which they say it is possible for platforms such as Amazon and eBay to implement within a matter of weeks. Let us have a delay, let us put it to the Productivity Commission to carry out an independent review, assessing the current vendor registration model and testing whether or not that model can be improved. It will provide the breathing room that we need in order to get this important reform right. Labor is in principle supportive of bringing down the low-value threshold; we are in principle supportive of boosting GST revenue and providing tax neutrality to Australian retailers. As I noted at the outset, they face a tough environment and it is getting tougher. But it would not be responsible, it would not be in keeping with our status as an alternative government, for us not to take the opportunity to look at whether or not this legislation can be improved, which is why the shadow Treasurer has foreshadowed the amendments that Labor will be moving in the other place.

We note, too, the fact that the Turnbull government, while talking a lot about the importance of getting the red tape burden right, did not put in place a regulatory impact statement for this bill. That is, itself, in breach of Office of Best Practice Regulation guidelines. We note that the call for a delay has come from the Conference of Asia Pacific Express Carriers and the Freight & Trade Alliance. We note, as well, that the government has throughout this process been unable to provide clear answers to the concerns that have been raised by platforms about how implementation will take place.

I suspect the coalition will eventually come around to Labor's way of thinking on this, just as they did with superannuation tax concessions, cigarette excise and funding community legal centres and as perhaps they will do one day even with climate change. Labor sets an evidence based agenda and the Liberals follow. We want to get the details of this right. We want to ensure that we have competitive neutrality, but we also want to ensure that Australians continue to gain the benefits of engagement with online platforms. There is massive consumer surplus to be had from online retail.

Online retail is not just about purchasing final products. Many Australian businesses rely on inputs that they source online. They might be stores that are buying technology that assists in their sale process. They might be factories purchasing machines that they use in order to produce final products. They might be home offices and small businesses purchasing their inputs online.

Access to online retail brings terrific benefits and will continue to do so as we move into a new world of Australia-based Amazon, with many Australians taking advantage of Prime, of the rapid ordering facilities—potentially even the use of drones. This raises important competition challenges down the line. As shadow minister for competition I am acutely aware of the importance of making sure that we have a competitive retail environment as we move to these online platforms, but we need to make sure that we have tax neutrality right and that we do so in a manner that is workable.

Australia is not the only country that is looking at the taxation of online retail. Other countries are exploring this issue. Other countries are watching what Australia does. In that sense, if one is concerned with global tax compliance, it is even more important that Australia gets this right and that we work with the technology companies—not for them, but cooperating with them—to ensure the Australian model is workable. It is important that we set a standard for others to follow to show that it is possible to collect value-added taxes in a way that does not raise a massive compliance burden on Australian consumers, that ensures tax neutrality and that ensures that, while changes in retail are inevitable, those changes are not driven off an unfair playing field because online retail is getting an unfair tax advantage. That is not the way in which competition ought to work.

Everyone has an obligation to pay their fair share of taxes: corporate taxes, income taxes and value-added taxes. Labor wants to see this measure succeed, and that is why we are proposing a 12-month delay and a Productivity Commission inquiry. It is in the government's interests to support Labor's changes, because in the long run that will ensure that we have a model that is workable, that is fair and that ensures that Australian consumers and taxpayers get the right outcome.

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