Thursday, 15 June 2017
Treasury Laws Amendment (GST Low Value Goods) Bill 2017; Second Reading
I rise to make a short contribution to the debate on the Treasury Laws Amendment (GST Low Value Goods) Bill 2017. This bill will have a significant impact on Australian retailers and consumers alike, as well as broader implications for how the Commonwealth will levy taxes and collect revenue well into the future. It is for these reasons that Labor has been applying sustained and considered scrutiny to this proposal since the government first announced, more than 12 months ago, its intention to legislate changes to how the GST will be applied to low-value imported goods. This scrutiny has proven to be warranted, as the government's implementation of this measure has certainly been less than ideal—a matter I will return to a little bit later.
The key objective at the heart of this bill is an attempt to achieve tax neutrality—that is, ensuring that offshore businesses do not enjoy an unfair competitive advantage over domestic firms with regard to the levying of the GST on Australian consumers. This is an objective that Labor have been supportive of for some time. We agree that there is merit in ensuring that Australian retailers, who employ significant numbers of Australian workers, are not disadvantaged vis-a-vis offshore retailers due to flaws in the design of our tax system.
In fact, it was Bill Shorten in 2011, as the Assistant Treasurer and Minister for Financial Services and Superannuation in the Gillard government, that directed the Productivity Commission to conduct an inquiry into the implications of globalisation on Australia's retail sector. These changes included that the growth of online retailing across international borders was radically transforming the consumption patterns of Australians and that the number of low-value goods exempt from the GST being imported into Australia was growing dramatically. The 2012 Productivity Commission review was also tasked with examining issues surrounding the imposition of GST on low-value goods coming to Australia.
In the end the Productivity Commission review was unequivocal in its findings. It found that levelling the playing field for Australian retailers was a public policy objective worth pursuing; however—and there was an important caveat—it should be pursued only once key issues surrounding the collection of the tax were resolved. Specifically, the Productivity Commission determined that the low-value threshold should be lowered only if it could be demonstrated that it is cost-effective to do so and that the costs of raising additional revenue by lowering the LVT are at least broadly comparable to the costs of raising other taxes.
Labor's shadow Treasurer, Chris Bowen, has consistently indicated throughout our time in opposition that, if these obstacles could be addressed and an efficient and manageable LVT GST collection framework could be implemented, then the Labor Party will provide its support. So what does the bill before us do and does it meet these tests? At present goods with a value of less than $1,000 are exempt from the goods and services tax when imported directly by consumers into Australia. This bill would see GST applied to all those goods starting in just two weeks time, on 1 July 2017. The aim of this, all things being equal, is to bring the tax treatment of low-value imported goods into line with goods sold locally by Australian retailers.
The government has chosen, from among a number of alternative models, to implement a vendor registration framework to collect and remit this GST. This would require the suppliers of those goods, including vendors, freight forwarders and electronic distribution platforms, to register for GST and to remit the appropriate tax to the Australian tax office. This will raise, on the government figures provided, a modest $300 million across the forward estimates. While we certainly support this proposal in principle, we remain guided by the desire to see the government implement a model of collection and compliance that is genuinely viable and which does not penalise consumers.
Since the release of the government's exposure draft legislation, I do not believe there has been a stakeholder group—ranging from the biggest international ecommerce platforms all the way down to domestic microbusinesses—that has not sought out members of the opposition to raise their concerns about this proposal. I have certainly had some raised with me in my role as shadow minister for small business.
Noting these concerns from stakeholders and having received inadequate assurances or any further clarity on how the measure will operate following additional Senate estimates, Labor chose to refer the bill to the Senate Economics Legislation Committee for inquiry. Again, this has been an invaluable process. It was useful, certainly, to flush out the concerns from stakeholders but also to be able to test some of these concerns with the public service advising the government.
The principle concerns raised were that the government's proposed model will be complex and costly to administer; that there would be unfavourable impacts on consumers with the cost of implementation being passed on; and that there will be issues surrounding compliance. In fact in evidence to the inquiry by Treasury officials, they revealed that they anticipate a very high rate of noncompliance of between 70 to 75 per cent even by this measures third year of operation. That means Treasury anticipates that less than one-third of liable firms will be compliant by July 2019. Treasury evidence also revealed that, even after half a decade of operation, they expect the compliance level will hit maturity at just over 50 per cent in 2022-23.
As my colleague Chris Bowen noted in his contribution to the debate on this bill, how a compliance rate of just over half can be expected to level the playing field for local retailers, as the government has been suggesting, is genuinely baffling. Additionally, on the compliance issue, the Senate inquiry's findings were clear that, under the government's preferred model, compliance is largely reliant on the goodwill of overseas operators and, currently, there is no effective mechanism to compel liable firms to enforce the measure on the ATO's behalf.
In further concerns in evidence to the committee, major ecommerce platforms, including eBay and Alibaba, were critical of being held liable for the GST collection on goods for which they are in fact only intermediaries in the sale and distribution of. These platforms noted their business model is to connect what are otherwise independent buyers and sellers, and this legislation would see them liable for collecting GST on products they never owned or had any role in distributing or handled funds for.
Effective stakeholders also made it clear in their submissions that they believe the government's model was especially unwieldy and would be expensive to administer. Ultimately, they argued that any additional compliance costs they incur would simply be borne by Australian consumers through higher prices.
Proprietary online retailers, such as ASOS, pointed to the fact that the measure's complexity and the low levels of estimated compliance would provide disreputable firms, including those who might potentially levy but not remit the GST, with an unfair price advantage over both complying offshore and local retailers. Similarly, the inquiry found that Australian consumers can be expected to bear the cost for the government's ill-conceived design with the Senate inquiry coming to the view that the measure is likely to lead to increased prices. There were even suggestions that, due to the model's complexity and the additional costs of compliance, some operators might cease serving the Australian market, leading to less competition, less choice and higher prices for Australian consumers.
Finally, on the issue of the implementation, the committee reported that many key exporters of low-value goods to Australia will struggle with the complexity of implementation, including the 1 July 2017 start date. Submissions to the committee were in fact almost uniform in their critique of the 1 July 2017 start date. That is hard to dispute, given we are now debating this legislation more than a year after it was announced and only two weeks before the government is assumedly expecting compliance.
Taking these varied and justified concerns from stakeholders into account, it was the view of the Senate committee, including the government's own members of that committee, that the start date for this legislation ought to be delayed until 1 July 2018. This delay was recommended to facilitate further consideration of the key issues of design, complexity and implementation. To this end, Labor agrees with the committee and those government senators who indeed proposed a 12-month delay.
On behalf of the Labor Party, in the committee stage of this debate I will be moving amendments to delay by one year the start date of the legislation until 1July 2018. We believe that this additional time will provide the necessary space for the government to get the model right. In a genuine sprit of bipartisanship we are willing to work with the government to make that happen. We have not subjected this measure to various methods of scrutiny with the hopes of derailing the legislation; rather, we have done so in good faith as we are broadly supportive of the proposal, legitimately seeking the best policy outcome for Australian consumers and business.
With that as our primary objective, in addition to the 12-month delay we will be proposing in our amendments that there be a requirement that the government vendor registration model, along with alternative models, be subjected to an inquiry by the independent Productivity Commission. The Productivity Commission will be required to provide its findings to the parliament well in advance of the 1 July start date in 2018, with a focus on recommending legislative amendments that could improve the legislation overall.
We believe these amendments are the responsible thing to do. They are in the interests of all stakeholders, and also, frankly, in the government's interest. It means that we continue to have a path forward on achieving greater tax neutrality whilst also strengthening the Commonwealth revenue base. I call on the government to recognise that there is broad in-principle support across the parliament for giving Australian retailers the level playing field they deserve, but to also recognise that parliamentary scrutiny undertaken in a cooperative spirit has revealed legitimate issues with the framework put forward in this bill. I hope I can call on other senators to support the amendments we will be moving later during this debate.
I rise to speak on the Treasury Laws Amendment (GST Low Value Goods) Bill 2017. My particular interest relates to the tampon tax. This bill is the first opportunity we have had in a few years to finally review the unfair and, frankly, sexist tax on women's bodies. We have circulated amendments that would remove the GST on sanitary items—hopefully all senators have that before them.
What might be of particular interest is new costings from the PBO which show that the removal of the tampon tax would cost approximately $115 million. The revenue that would be raised by this bill, should it pass the parliament, is about $300 million. Previously, the states have said, 'We can't afford to take this unfair, sexist tax off women's bodies because where's the revenue going to come from?' This bill provides the revenue—about $300 million. If the states were to agree along with this chamber to take the tampon tax off, they would still be almost $200 million ahead. They would be $185 million ahead. So there is no revenue excuse anymore for anyone in this chamber or for the last remaining states to say that they cannot afford to take this sexist, discriminatory tax off women's bodies.
The tampon tax is a tax on women's bodies. It is a biological function. The GST is meant to be on luxury goods. It is no luxury to have periods every month, and why we should be taxed for a necessary item—it is certainly not an optional item—when other things like condoms, lubricants or even sunscreens, for that matter, are GST-free. This is clearly a sexist tax that has a disproportionate impact on women. Only we have to pay for these items, yet condoms and lubricants are GST-free.
This is a great opportunity to build on the work that has been done on this issue over many decades. In fact, this is Labor Party policy, and I am looking forward to the Labor Party supporting these amendments and, I hope, to the government supporting these sensible amendments as well. Joe Hockey said on Q&A in 2015 in a response to a question from a young woman, Subeta Vimalarajah, that he would look at removing the GST from tampons. Of course, it then went to COAG and, in fact, half the states and territories said: 'Great! We think this is a good idea to get rid of this sexist, discriminatory tax.' There are a few states and territories holding out. I have again written to them and asked them to reconsider in light of the fact that this bill would provide them the revenue to cover any shortfall.
We actually have a chance at reform here. It has been Greens policy for many decades to abolish this sexist tax and to make sure that women are not being penalised for the sanitary items we have to purchase every month. Apparently, this is Labor Party policy. We have seen some willingness from government members in the past to say that they too think this is unfair and that they are happy to look at it. Now is our opportunity to do so. Now is our opportunity to finally say that women should not be punished for our biology and we should not be unfairly taxed on items that are a necessity.
We already have a huge wealth inequality gap, we are already behind on superannuation and we are already behind in terms of the gender pay gap. The facts are really clear: we do not need yet another tax on our biology to further worsen that financial inequality. So I would urge all members in the chamber to support these Greens amendments to abolish the tampon tax and to finally remove that vestige of sexist discriminatory policy from our tax laws.