Monday, 19 June 2017
Treasury Laws Amendment (GST Low Value Goods) Bill 2017; In Committee
by leave—I move amendments (1) through (4) on sheet 8153 together:
(1) Schedule 1, page 24 (after line 35), after item 53, insert:
53A At the end of Division 177
177 -20 Review of provisions relating to offshore supplies of low value goods
(1) By the day after this section commences, the Productivity Minister must, under Part 3 of the Productivity Commission Act 1998, refer to the Productivity Commission for inquiry the matter of the amendments to this Act made by the amending Act, including:
(a) the effectiveness of the amendments; and
(b) whether models for collecting goods and services tax in relation to *offshore supplies of low value goods other than the amendments might be suitable (including evaluation of the effects of the models on Australian small businesses and *consumers); and
(c) any other aspect the Productivity Commission considers relevant to the implementation of the amendments.
(2) In referring the matter to the Productivity Commission for inquiry, the Productivity Minister must:
(a) under paragraph 11(1)(a) of the Productivity Commission Act 1998, require the Productivity Commission to hold hearings for the purposes of the inquiry; and
(b) under paragraph 11(1)(b) of that Act, specify the period ending on 31 October 2017 as the period within which the Productivity Commission must submit its report on the inquiry; and
(c) under paragraph 11(1)(d) of that Act, require the Productivity Commission to make recommendations in relation to the matter referred to in subsection (1).
Note: Under section 12 of the Productivity Commission Act 1998, the Productivity Minister must cause a copy of the Productivity Commission's report to be tabled in each House of the Parliament.
(3) The Productivity Minister must not withdraw the reference before the Productivity Minister has received the report.
(4) For the purposes of paragraph 6(1)(a) of the Productivity Commission Act 1998, the matter mentioned in subsection (1) is taken to be a matter relating to industry, industry development and productivity.
(5) In this section:
amending Act means theTreasury Laws Amendment (GST Low Value Goods) Act 2017.
Productivity Minister means the Minister administering the Productivity Commission Act 1998.
(2) Schedule 1, item 65, page 27 (line 5), omit "1 July 2017", substitute "1 July 2018".
(3) Schedule 1, item 65, page 27 (line 6), omit "1 July 2017", substitute "1 July 2018".
(4) Schedule 1, item 65, page 27 (lines 9 and 10), omit "1 July 2017", substitute "1 July 2018".
I did go into this in some detail in my speech during the second reading, but Labor is proposing these amendments basically to deal with the mess that would be otherwise created if the Treasury Laws Amendment (GST Low Value Goods) Bill 2017 were to pass unamended.
These amendments are really about trying to provide the best possible outcome for Australian consumers and retailers. They go to dealing with the issues and concerns that have been raised since these new arrangements were announced and indeed through the Senate process. It is largely around the government's proposed vendor model—how complex and costly it would be to administer—as well as the potential unfavourable impacts on consumers, with the cost of the implementation of this model being passed on, and other issues surrounding compliance, and I think we heard Senator Macdonald raise some of those during the second reading debate this morning.
The amendments the opposition is moving today are really to delay the commencement, firstly, by 12 months, to 1 July 2018. I think it is just inconceivable that the arrangements are in place for low-value goods to be subject to GST within the next 10 days. I do not think anyone is pretending to believe that is actually the case. So, this would deal with that problem which is looming before us. It would also allow for a short Productivity Commission inquiry into the legislation's proposed model of GST imposition on low-value imported goods and other, alternative models, with a short inquiry to report by 31 October 2017, which would allow, again, the time to be provided both to the government and to this chamber or the parliament if there are further issues prior to the commencement of the arrangements on 1 July 2018. These are very important amendments—people genuinely want to see GST being levied on low-value goods, but in a responsible way that will not create chaos.
Can I just respond briefly to comments that Senator Whish-Wilson made in his second reading contribution around the fact that whatever this Productivity Commission's findings might be they are not binding, and there is no commitment that changes would be made. When you look at the amendment we have drafted, it would be a very brave government that would ignore any findings or recommendations from the Productivity Commission about the imposition of these arrangements. That is why we have put them in as we have. We think that will assist the government and, more importantly, these amendments will responsibly deal with a problem that has really been all of the government's own making and try and put in place a reasonable way forward for a principle that we support but an implementation we cannot support. They will deal with those very significant concerns. Even though they do delay these arrangements until 1 July, we are convinced there is no other way to clean up the government's mess.
I am inclined to agree with the substance of the amendments that are being proposed. I was a member of the Economics Legislation Committee that looked at this in some detail. Some of the concerns that have been raised by Senator Gallagher were raised in that committee hearing. The committee, in its wisdom I think, unanimously recommended that the legislation be delayed for 12 months because, as Senator Gallagher said, it is almost impossible to expect people to get ready in the next couple of weeks to implement the arrangements. There does seem to me to be some merit in having a closer look at the issues.
This is a bill that must pass at some stage. I will not repeat what I said in my speech on the second reading, but it is important for small business, for Australian retailers, to have the playing field levelled so that competitors who live overseas do not automatically get a 10 per cent benefit on the sale of goods in Australia. The legislation is essential. As I said before, it is long overdue. I am sorry that supporting the delay for another year will mean another year that Australian retailers will have this unfair competition, but I do not see any other way.
I did want ask the minister, as I foreshadowed in my speech on the second reading, to again explain why the vendor model was preferred over the logistics model, bearing in mind, as I understand it, that the logistics model is already in place for goods imported into Australia of over $1,000 in value. If that is the case, wouldn't it be ever so much more simple just to extend that to goods under $1,000? Quite frankly, I understand that these days—I have not been involved in this—you press a button on the computer and it does it all. You press a button and it collects the money; you press another button and it sends it to the Australian government. I just cannot understand where the problem is, so I ask the minister why the vendor model was preferred over the logistics model, which common sense would tell me is better. Could the minister also comment on the things that, again, I mentioned in my speech on the second reading—that the logistics model would return $1.8 billion in revenue, whereas according to Treasury the vendor model will only return $300 million. Also, could the minister comment on the issues, as I understand them, that Treasury have calculated that by the time the whole scheme is rolled out the compliance will be only 54 per cent under the vendor model. I would be interested if the minister could mention those. That is the only part I will take in this debate. I am inclined at this stage to support the amendments being proposed by the Labor Party.
I thank Senator Macdonald for his contribution. Let me, on behalf of the government, indicate right at the outset that the government does not support this amendment. This issue has been reviewed many times over the years. All of the various collection models have been thoroughly assessed over the years and the government's judgement is that the vendor collection model is the most appropriate model to collect GST on low value goods as it takes into account who has the information to determine GST liabilities and prevents goods being held up at the border. The vendor collection model has been agreed to by the states and territories, as it is the most appropriate model to collect GST from overseas multinationals and to level the playing field for Australian businesses. Obviously, we will be concerned if the Senate were to vote to delay the implementation of this requirement. The advice that the government has in front of it from the relevant agencies is that the government is ready to administer this from 1 July 2017.
Let me also say in relation to the vendor collection model that it is assessed as the most efficient and cost-effective model, which is why Switzerland, for example, has announced legislation to require vendors to collect GST of value added tax on low value imports from 1 January 2018. Within the European Union, vendors are already required to charge and collect GST on sales within the European Union. The OECD and the EU are also focusing on taxation of goods by the supplier at the point of sale. It is also important to note that the vendor collection model has already been used to collect GST on cross-border digital products and services, and this is the case in countries such as Japan, South Korea, New Zealand, member states of the EU, Switzerland, Norway, South Africa and, from 1 July 2017, Australia.
We did consider the alternative of the logistics model whereby transport companies charge and collect GST. This model could provide a high level of coverage but it would also be very expensive to implement. Currently, transporters are removed from the point of sale and do not have complete information to assess the GST payable. This model would require the transport intermediaries as well as every vendor they deal with to provide additional data on the taxable or exempt nature of goods, as well as the consumer or business status of the importer, to calculate the GST. An important point in this context is that, according to the Department of Immigration and Border Protection data for 2015-16, more than 33 million consignments came into Australia with a value of less than $1,000.
In relation to the specific question that Senator Macdonald asked about evidence by some stakeholders that the logistics model would deliver higher revenue, Treasury's view is that the administration costs associated with collecting GST on the logistics model are likely to largely offset the amount of GST revenue collected, even if the collection model generates greater participation and compliance. For example, Australia Post, in their submission, stated that they would require an estimated $900 million per annum to support a logistics collection model, which would completely offset KPMG's estimate of the potential revenue. The main issue with the KPMG analysis is that it does not account for the differences in administration costs under each collection model. As I have indicated, for these reasons the government will not be supporting these amendments.
Okay. I will save you asking it. If it works for goods above $1,000 and the end of the world hasn't come then, quite frankly, I do not mind if it does add a little bit of cost to the importation of goods, because, again, that suits the main issue I have with this bill in that it makes Australian retailers that bit more competitive against foreign imports by mail or otherwise. It does not worry me that it makes things a little bit more expensive; it does help the retailers.
If you walk down any street of any town in Queensland, you will see many retail shops vacant. One of the reasons given to me by people who used to be in those shops is that they simply cannot compete with the items coming in from overseas, for many reasons; the first of which is that their customers pay 10 per cent more than those same customers would pay if they ordered it online from overseas. Those customers get the good—I am told—in two or three days, because the logistics companies are so good these days at getting the goods to your door. That efficiency is quite remarkable. I struggle to find how those logistics companies would then find it at all difficult to collect and disburse the 10 per cent. This will be my last question: if it is okay for another thousand dollars, why not below $1,000?
For goods above $1,000, my advice is that they get processed through a border model. Goods get stopped at the border before Customs processing. Obviously, there is a much smaller volume, and the treatment of these higher value goods has always been quite different to the more efficient way that low-value goods are processed through the border. Essentially, the revenue per item above $1,000 is obviously higher; the numbers are lower; and there is already a process that takes place as part of the normal border and freight forwarding processes that does not apply to the 33-plus million products below $1,000. We would essentially have to set up a very significant process of stopping all these goods at the border in order to implement the sort of process that Senator Macdonald and others have suggested.
In summary, this has been looked at by experts in all different directions for a very long time. Consistently, the conclusion that has come back is that to most efficiently administer this sort of proposal—to apply GST to products below $1,000—is through a vendor model. People are entitled to different views on these things but that has consistently been the advice to the government and we have not seen anything that would change our view.
I move amendment (1) on sheet 8156:
(1) Page 27 (after line 16), at the end of the Bill, add:
A New Tax System (Goods and Services Tax) Act 1999
1 At the end of Subdivision 38 -B
38 -65 Sanitary products
A supply of *sanitary products is GST-free.
2 Section 195 -1
sanitary products means tampons, sanitary pads, panty liners and similar items.
The amendments made to the A New Tax System (Goods and Services Tax) Act 1999 by this Schedule apply in relation to supplies made on or after 1 July 2017.
This amendment aims to use this bill as an opportunity to abolish the tampon tax. It is pretty clear that the revenue that would be raised by this bill—which I understand has the support of both of the large parties and hence will pass—would be about $300 million. We have asked the Parliamentary Budget Office to cost how much removing the tampon tax would cost, and they said it would be about $115 million. So the states would still be $185 million ahead if they were to agree to remove the tampon tax.
This is a great opportunity to finally address this sexist taxation of women's biology. For some reason, when the GST laws were written it was decided that sanitary items were a luxury item. It could not be further from the truth. There is no luxury at all to need to buy these products every month, and it is a sexist tax that applies only to women. When you look at the fact that condoms and lubricant are GST-free yet sanitary items are not GST-free, it is clear that women are being taxed for their biology. We have an opportunity to fix that here today. With this bill we have any opportunity to assure the states that they will not be short on money, that they will in fact have a revenue source that could compensate for the loss of revenue taxed off the back of women's biology. So this is a very important opportunity, and I would hope that both sides of this chamber would consider seriously this chance to rectify a historical wrong, which is in fact a sexist tax on women's biology.
I would also like to flag that later today I will be tabling the petition I alluded to earlier, which over the weekend has already garnered more than 11,000 signatures from people who agree that this sexist tax on women's biology and women's bodies needs to go. Today is our chance to axe the tampon tax. This has been talked about for many decades, and I want to acknowledge that several decades ago it was members of the Labor Party who moved to abolish the tax. It was then Senator Natasha Stott-Despoja who moved in this place to abolish the tax—wouldn't it be great if today we could finally get that job done for the legions of Australia women who are balancing the budget off the back of their biology?
First, I have to correct the proposition that GST applies to those particular goods because they are considered luxury items. That is not right. GST applies to all goods and services unless they have been exempted through relevant means. That is the situation.
The government undertook to raise the issue of the application of GST to feminine hygiene products with the states and territories and to seek their views on the matter. At the Council on Federal Financial Relations tax reform workshop on 21 August 2015, the states and territories considered a proposal to remove the GST from feminine hygiene products. As there was no unanimous agreement at the time, no change to the existing GST arrangements for these products will be progressed. I hasten to add that the usual process of dealing with a proposal to exempt any health goods from GST is through a determination by the Minister for Health, not through an amendment to a bill like this.
Labor certainly agrees that we need a way to fix the current arrangements around the GST and sanitary products, and we have certainly been clear about this in the past, but we do not believe an amendment to this bill is the way to fix it. We think in all fairness, considering how important the GST is for states and territories, and indeed the agreement that exists between the Commonwealth and the states and territories on GST arrangements, that these discussions about how this should be done and when it should be done needs to happen with all of those parties but also needs to be done at the start of the process, not at the end of it here in this chamber.
We understand the Greens position on this issue. Labor has previously put forward the proposal that the additional GST on digital downloads be used to more than offset the cost of exempting sanitary products, and I think that was a condition that we urged the former Treasurer to take to the treasurers meeting to discuss and reach agreement on. I think at that meeting there were Liberal state treasurers who disagreed with that approach. Whilst we will not support this amendment this morning, we do acknowledge the intent behind it and certainly the Labor Party's view is that this is something that we need to look at further and we need to examine and discuss with all relevant parties how the removal of GST on sanitary products could be progressed with the agreement of all parties. At this point we will not be supporting this amendment to this bill.
I am very disappointed to hear that. I acknowledge what the minister said about health items, and that is indeed the point I am trying to make. By not listing tampons and pads and sanitary items as health items they are in effect being deemed as de facto luxury goods. How on earth can condoms and lube and sunscreen be called health products—which they should be—but not sanitary items? So thank you, Minister—you have reinforced the very point I was trying to make, although I do not think that was your intention.
Yes, this was discussed at COAG in August 2015. That is almost two years ago now, and what a shame that we have had a continual roadblock. We have half the states and territories on board. We have since had a change of government in WA, so I would hazard a guess that we now have more than half of the states and territories agreeing to remove this sexist tax. I have written to the state and territory premiers and treasurers in the last week, urging them to reconsider their position and pointing out that there would not be any net revenue loss by virtue of the revenue that is likely to be raised from this bill passing with the support of each of your parties. I hope that they are considering that correspondence. I know that they are receiving a lot of calls from their own constituents, because people care about this issue. This is an unfair tax that penalises women, and there is no good reason for it to continue.
I am very disappointed that you say now is not the chance to fix it. We have very few opportunities to do the right thing in this chamber, and today is one of them. I find it really disappointing and not very persuasive that you are saying it is not a good idea to do it today. I do not buy that and I do not think the Australian community will buy that.
This is, of course, why we moved the second reading amendment, which said, 'Let's delay the discussion of this particular bill until those state and territory premiers can have a chance to consider the views of their constituents and, hopefully, get on board with the momentum to removing this sexist tax.' Unfortunately, we did not receive any support for that amendment. Sadly, it looks like we are not going to receive any support for this amendment either. I think Australian women will be incredibly disappointed with this chamber if that is how the vote goes and I urge both parties to reconsider their position before the vote happens.
The Nick Xenophon Team will be supporting the amendment moved by Senator Waters today on sheet 8156. Since the GST was introduced in 2000, the Australian government has slapped every Australian menstruating woman with a 10 per cent tax every time she gets her period. Women do not buy pads and tampons for pleasure or luxury; they are essential health items. It is an absolute absurdity that the government and opposition are continuing to support what is essentially a tax on women's bodily functions.
Condoms have been made GST-exempt due to their important health benefits, yet pads and tampons, which are essential for the reproductive health of an estimated six million Australians, are slapped with a 10 per cent tax. It is estimated that women use up to 30 individual pads or tampons during their periods, costing up to $15 per cycle. A woman can have 450 menstrual cycles over the course of her life, meaning she can spend close to $7,000 in a lifetime on pads and tampons, and this is multiplied in households with daughters. What message is the parliament giving to young women in circumstances where the tax on women's menstrual hygiene products is unfairly borne by women only because women bleed? Any argument about the budget bottom line flatly ignores what is fundamentally an issue of social and economic equity.
Women earn on average $261.30 less per week than their male counterparts and they are also statistically at greater risk of living below the poverty line. This tax also disproportionately targets those who may already be disadvantaged, including the homeless and the unemployed. We should not be continuing to force an underpaid or disadvantaged portion of society to pay more for basic essentials, and that is why the Nick Xenophon Team will be supporting this amendment.
The CHAIR: The question is that amendment (1) on sheet 8156 as moved by Senator Waters be agreed to.