Monday, 19 June 2017
Treasury Laws Amendment (GST Low Value Goods) Bill 2017; Second Reading
I rise to continue my remarks on this bill, which the Greens see as a fantastic opportunity for the GST to be removed from tampons and sanitary pads. We have had statements from both sides of this chamber indicating that others too think this is a sexist tax whose time has come and that it should be removed. This is an opportunity for both sides of this chamber to support the removal of this sexist tax on women's biology.
When the GST laws were drafted—perhaps there were no women in the room—it was deemed that sanitary items were a luxury item for women. Guys, it is biology, it is no luxury, and this is something that should not have the GST applied to it. I spoke to that last week.
What I would like to do today is move a second reading amendment, which I understand has now been circulated in the chamber. Hopefully people have received that; if not, it will be coming very shortly. It is very brief and asks that the debate on this bill be suspended until such time as state and territory treasurers have time to consider the proposal to remove the tampon tax. Half the states and territories now support the removal of GST from tampons and sanitary items. The remaining states and territories last year did not support it, but with the revenue raised from this bill, which we understand will be going through the chamber with the support of both the old parties, the states would not fall short. They would be able to support removing the GST from tampons and not be out of pocket. This is a great opportunity for us finally to remove this discriminatory tax on women's biology. We have that opportunity today.
I want to acknowledge the broad support for this issue that we received over the weekend. We started a petition late last week, off the back of many, many years of campaigning on this issue. Over the weekend, 11,000 people signed a petition saying that we need to remove this sexist and discriminatory tax on women's biology—this tax on tampons and pads that was probably put on with a whole lot of men in the room, and, sadly, not enough women in the room, if any at all. We will be moving that second reading amendment, and I will do so shortly, to ask that this bill be delayed until such time as the states and territories can consider the good financial reasoning for removing this discriminatory tax. I want to thank the 11,600 people who signed the petition over the weekend supporting the removal of the GST on pads and tampons. I will flag that, whilst I do not have it with me at the minute, I will be tabling that petition later today. I am sure signatures will keep flooding in, but I want to thank those signatories who have done so. I move the following amendment, and I presume we will vote on it in due course:
Leave out all words after "that", insert:
" the debate on this bill be adjourned until State and Territory Treasurers have had an opportunity to consider the Australian Greens’ proposal to remove t he tampon tax."
This is a bill whose time has at last come. The Treasury Laws Amendment (GST Low Value Goods) Bill 2017 is a bill that I believe should have been introduced many, many years ago, to ensure that imported goods under $1,000 had the same tax on them as those same goods would have had if they were sold by an Australian retailer within Australia. For too long, our small businesspeople in Australia and the retailers in our country have had to put up with this very unfair competition; that is, they could sell a good—an item of clothing or some other well-used good in Australia—but they would always start 10 per cent behind the price that a foreign dispatcher of that same good could charge. Over the years, so many constituents who are in small business would complain to me about how our fellow Australians would go into their shop, have a look around, see the particular good they wanted and the statistics of that particular good, then walk out of the shop, go home, and order it online from overseas for at least 10 per cent less than my constituents in Queensland could charge.
To a degree, this is an issue that has impacted upon small businesspeople, particularly in Australia, for a long period of time. In our wisdom, the parliament in the past decided that goods over $1,000 in value would be subject to the GST, but we gave this exemption for lower value goods mainly, I suspect, because it was always thought to be too hard to collect money on hundreds of thousands—perhaps even millions—of goods that were acquired by Australians from overseas retailers at relatively low values. I can understand the concern that the Treasury and the public service would have had with that, but I come at this from the position of my constituents and the people who support our party—small business people—who have been unfairly disadvantaged for a long period of time now. I am delighted that this bill is at last going to address that. I tell somewhat humorously that the first person who raised this with me, three or four years ago now, was a local businessman in Townsville who had a number of businesses, but one of them was an adult shop. He came to me and he said that people were no longer using his shop because they could get the same goods much cheaper from overseas because he had to comply with Australian moral laws, but, more importantly, he had to comply with the GST laws. His sale items were always 10 per cent more than those of his competitors who were overseas, who could ship the goods in. According to him and others of my constituents who have raised it with me, within three or four days the goods would be at the residence of the buyer. In his business, that was another attraction. I only mention that because that was a graphic example of why reform was needed in this area.
I will briefly refer to Senator Waters' speech, in which she addressed a particular item on which she is introducing a second reading amendment. It would be good if we could remove the GST from everything. Australians would generally love that, but unfortunately the state governments—who get all of the revenue from the GST—would not be very keen on that. That is because the GST is the main revenue of the states. I say to Senator Waters: if she has an important issue there, I would think the first port of call for her would be to see the states and to see—
It is another case where there is one rule for everybody else and one rule for the Greens. If I dare interject when Senator Waters is talking, you have everyone in the Greens political party taking a point of order. But as I say, there is one rule for everybody else and a separable rule for the Greens.
I do not want to spend a lot on that particular part of the debate. I simply say that if Senator Waters came with the agreement of every state government to that reduction in their GST revenue, then I think it is something perhaps the Commonwealth should look—although I doubt that it is in this bill that you would address something like that. Perhaps it needs a piece of legislation that is more specifically to the point. But I would be interested to hear from Senator Waters if all of the states have agreed to forfeit the revenue in the manner she proposes.
That does lead me just to emphasise that this is a GST bill. So far as the Commonwealth is concerned, the revenue raised is not particularly relevant—and I emphasise 'particularly'—because all of the money raised from this will go to the states. My own state of Queensland is a classic example. That state, which has been very poorly managed financially for a long period of time, certainly needs every cent it can get from whatever sources. The revenue raised from this bill, should it be passed, would be going straight to the state government.
I do have one concern with this bill that I may pursue further in the committee stage: that is, the method of collection. I have raised this with both the finance minister and the Treasurer. They have been courteous in their responses to me, but I find it difficult to understand why we have a method of collection on goods above $1,000 that I will refer to as the vendor method of collection. According to Treasury estimates, if we use the vendor method of collection—which is that vendors overseas will collect the GST and pay it to Australian government—then that would raise $300 million over the forward years. But I wonder whether every vendor in every country around the world is going to do this, particularly the little vendors. I can appreciate that the big vendors, the people who are in this as a major part of their business, would do the right thing, and if they are of the vendors they will charge the tax, will collect it and will send it to the Australian government. But, if for a little backyard operation sending goods by post to Australia, one wonders how that is going to be enforced. Will these smaller vendors in backyards in America, South America and Europe say, 'Yes, we're obliged to collect a 10 per cent tax on behalf of the Australian government, so we will collect it and, hand on heart, we will send that tax to the Australian government by the next post'? I am sure it does not work like that, but the principle does worry me.
It would seem to me far easier to get the logistics companies who bring these goods into Australia, be it Australia Post or any of the international transport organisations, to add the GST, collect it and pay it to the Australian government. Arguments have been raised that this would be very onerous for them, but they already do it, as I understand the system, on goods of over $1,000. They have their computers set up and they have their processes in place to add the GST at the delivery stage—to press a button on their computer, charge the additional GST, press another button to collect it all together and press another button to send the GST to the Australian government. I am not sure why we are changing the system for those goods under $1,000; I have not been convinced that it is a better way to go.
KPMG, obviously, are employed by those vendors who do a lot of work in Australia. I acknowledge that have a purpose for it, and I am sure KPMG have been around to see everyone in this building, but I think they have a point: if we do it for goods above $1,000 with the delivery model, why not below $1,000? I find that difficult to understand. According to KPMG—and I make the qualification that they are a reliable organisation—if it was the logistics model, the delivery model, the revenue collected would be $1.8 billion, as opposed to Treasury's estimate of just $300 billion over the forward estimates. It would seem from the point of view of Australian governments' revenue collection that that would be a better model for the states. Again, this is not a matter for the Commonwealth government to be too concerned about in relation to revenue raised because all of the revenue goes to the state governments. But a collection of $1.8 billion as opposed to $300 billion over the forward estimate seems to me to be another reason why the government should seriously look at what is called the logistics model for the collection of this tax. My main concern is that we do it on goods valued above $1,000, and in that way we use the logistics model. But, for goods below $1,000, we are now going to say it is up to every individual vendor around the country to do the right thing by the Australian government.
The big vendors—and again KPMG are working on behalf of the big retailers whose business is delivering goods into Australia—have indicated to us that they will comply with the rules, whatever the rules are, and I believe them. But what they are concerned about, of course, is that their competitors will not do the same thing, and there will be lots of little organisations set up that will sell the same goods as the big vendors but that will not be collecting the 10 per cent GST, and therefore the big vendors will become uncompetitive. I can understand that. I do need—and I will in the committee stage, if I get the opportunity—to try and clarify those issues.
Can I point out that the Treasury say in their submission that, even when this scheme is fully implemented, the collection rate will only be 54 per cent. I understand that to be saying the Treasury expect that 46 per cent of small retailers who sell into Australia will not be charging and forwarding the GST collected to the Australian government. That in itself is a concern and makes me wonder about the efficacy of the arrangement. Perhaps I have this wrong, but, as I have said, I have spoken to both the Treasurer and the finance minister. There are a number of reasons that I would like the government to seriously consider whether the logistics model would not be better than the vendor model. I make this contribution as I always do: relying on my understanding of these things—not always accurate, but that is as I understand it. I am a little concerned at the way this is going.
Having said that, I conclude where I started: this legislation is long overdue. It will put a little bit of balance back into the competition between the small retailers in Australia who were unfairly competing against retailers overseas, in that Australian retailers had to collect the 10 per cent GST, whereas their overseas competitors did not have to do that. Therefore, the overseas competitors could sell goods at commencement at 10 per cent less, and that gave them an unfair advantage over small businesses in Australia, many of whom are currently struggling for survival.
The Treasury Laws Amendment (GST Low Value Goods) Bill 2017is indeed quite important, yet we see that it is being implemented and debated in this chamber just two weeks before its effective start date on 1 July. It clearly outlines the way in which the government has bungled the management of this very important issue from the outset.
The policy objective of ensuring overseas retailers are on a level playing field with Australian retailers when it comes to the GST has been around for a long, long time. I note that when Labor was in government, the Productivity Commission made it clear that this was something worth pursuing. Therefore, the objective is worthy. That was based on the economics of collecting the tax making sense: namely, that the cost of collecting GST from foreign retailers was outweighed by the revenue from those retailers, which, of course, makes sense. But, when we look at the government's solution to this problem—the legislation that is currently being debated—we see that this measure was announced in 2016 budget. Here we are after the 2017 budget, with the legislation only having been introduced last February.
It is simply unworkable that this legislation be in operation by 1 July this year. As we know, the bill seeks to apply the GST to goods with a value of less than $1,000 that are being imported directly by consumers into Australia. We know that these goods are exempt from the GST and that the government is seeking to have this measure take effect from 1 July. Under this legislation, overseas suppliers including platforms such as eBay and Amazon, and redeliverer services, with an Australian turnover of $75,000 or more in a 12-month period, will be required to register for and charge the GST. We note from the 2016 budget that this measure was due to raise $300 million over the previous year's forward estimates, and yet it still has not passed in this place.
Labor have an open mind on this issue. We are committed to fair taxation, and we support this in principle. It is about a level playing field for Australian businesses, which arguably the government intends to do with this legislation. But the details of it must be right, and plainly they are not. I note that my good colleague Senator Gallagher is moving amendments on behalf of the opposition to try to fix some of the bungles made by the government. We want to see a model that is workable, that retailers are able to comply with and that does not adversely impact on Australian consumers. So we have been concerned for some time about issues regarding this legislation's implementation, particularly how the GST would be collected. Let's talk through what a workable model needs to represent.
We note that submissions to the Senate inquiry raised a number of issues with the government's model. Electronic distribution platforms such as eBay, Etsy and Alibaba were critical of being liable for goods they simply served as a platform for, as opposed to owning or holding them, likening it to a shopping centre being liable for GST on goods sold by its tenants. They believe that the system would be complex and costly to administer, with the costs being passed on to consumers. You can see from this that a key problem with the legislation is that it is not platform neutral. We can see online retailers such as ASOS being concerned about the complexity of the measure, and the low level of compliance would provide less reputable firms with competitive advantage. We heard from freight companies and express carriers strongly opposing a system that required the collection of business numbers and vendor registration numbers, saying it would create complexity, resulting in unnecessary delays and increased costs which would be passed on to consumers. In terms of the impact on consumers, the Senate inquiry found that basically the measure would end up in increased prices. In addition, the costs of implementation were going to be passed on to consumers. There was also concern that some platforms might simply need to close their operations.
Lastly, on implementation, the Senate inquiry concluded that there would be significant challenges for some parties in implementing this measure. There were some submissions that were critical of the 1 July start date, ranging from saying it was impossible—with some vendors taking two or three years and express carriers another year after that—to saying that the time allowed for implementation was absurdly short. Here we are, just two weeks before the start date for this legislation. Ironically, we have the likes of Senator Macdonald here. Clearly the government senators have concerns among themselves, as Senator Macdonald's comments reflect. The Senate committee was in fact unanimous in its view that the start date should be delayed to 1 July 2018 to ensure the issues around the model, complexity and implementation could be worked through properly. So it seems extraordinary to me that it is up to the opposition to move amendments on issues like the start date, but I am pleased that Senator Gallagher is doing so, because it is only with those kinds of changes that this legislation is at all tenable. We can see that government senators made recommendations for the government's own legislation to be delayed.
Importantly, the opposition is also moving amendments that would see this provision reviewed by the Productivity Commission. If you look at the issues that I have already outlined in my speech in relation to a level playing field between different kinds of retailers and some of the complexities associated with it, it is very important that this measure be monitored from the outset and reported on so that further amendments can be made to this legislation in the future. Labor would support the government amending the legislation before parliament to reflect this recommended start date, and I hope they move with us to do so. This is a delay that will help get what we are doing in this chamber today right, and we want to work across the chamber in a bipartisan way to do this. Our principles on this issue have been clear from the outset: we need a level playing field for Australian retailers competing with overseas retailers while ensuring that there is a workable model that can easily be complied with by overseas retailers and online platforms, without any adverse impacts on Australian consumers.
In speaking to this legislation, I cannot let an opportunity to talk about the GST in this place go without mentioning the particular plight of Western Australia and the issues that confront our state's finances. It is directly relevant to this debate because, when we look at the states that are pulling their weight in raising revenue, Western Australia works very hard to do things like invest in its mining industry, which takes expenditure, in order that the Commonwealth is able to raise more revenue. In that context, revenue raising measures like this are also important because they will raise more revenue under the GST but will do so in a way that do not adversely affect people who are trying to pay for things like rent and food et cetera. But when it comes to Western Australia's fair share of revenue raising, it only gets 34c in every dollar of GST raised. The GST allocation system in this nation is broken. It is unfair that, when a measure like this is introduced, Western Australians, in buying online goods, will be paying GST on goods under $1,000 but will not be get any more than 34c back in a dollar to the state's finances and that is outrageous
The current collection and distribution method of GST in this country has a disproportionate effect on Western Australia, specifically in how it is being applied to remote areas and how gambling revenue is not assessed in the calculation. We desperately need a change in how the distribution is calculated so that it does not discriminate against WA. My priority is a better deal for WA whatever way we are able to make that happen.
Labor's priority is clearly about protecting living standards, jobs and providing a secure economic future for our nation, and this means a stronger economy that does not leave the people of my home state of WA left behind. I have to say, the unfairness of the GST distribution system, which was always unfair, is indeed being compounded by the mess made by the previous Liberal Barnett government in Western Australia. The state government is not only facing substantial budget pressures, which are a factor of the bad record of the previous government, but also the unfairness of the current GST distribution system. Reform to this system is desperately needed to alleviate some pressure on the state of WA. We should not bear the burden of paying back more debt and taking on the burden of more debt to cover the shortfall on GST.
The federal government clearly has a major problem with the tax system and it needs to be reformed. We have had a federal coalition government side by side with the previous state coalition in WA for some time that have taken no action on the GST. Liberal prime ministers have been playing a game where they promise Western Australia more GST without any jurisdiction but, ultimately, they have come up with no concrete plan or proposal, so Western Australia is very clearly being short-changed. When Western Australia does well, the nation does well. Currently, we are not getting our fair share of Commonwealth resources. WA is doing the right thing by the national economy by pulling its weight in raising taxes across the state by exploiting its resources in a way that helps the Commonwealth raise revenue and is being unfairly punished for that. The deterioration of iron ore prices and the mess of the Barnett government in Western Australia mean that Western Australia needs a fair go with the GST. Western Australia has done its fair share of the heavy lifting for the national economy, so reform on the GST distribution system is long overdue.
So, in closing, when we look at this issue and the fact that Western Australians will again, on either 1 July this year or 1 July next year, depending on whether the opposition's amendments are successful—and I note that our support for this legislation is contingent on those amendments passing—be picking up more of the burden of the GST. They will be getting back only 34c in the dollar of all the goods they buy that come from overseas that fall under the $1,000 threshold in this legislation.
It does not matter whether you vote for Labor or the Liberals; either way, you get a government that sets impossible hurdles to employing the unemployed, you get a government that buries businesses in red tape, you get a government that raises the cost of living and you get a government that just loves to tax. When the GST was first introduced, Commonwealth tax, including the GST, was equivalent to $12,000 per person in current prices. Now it is $14,000 per person. But that is not enough for the Liberal-Labor unity ticket. With the bill before us today, the Treasury Laws Amendment (GST Low Value Goods) Bill 2017, the Liberals are extending the reach of GST to imports that are valued at less than $1,000, facilitated by platforms such as eBay and Amazon. And while Labor want to delay this extension, they still support the bill.
As well as raise revenue, the bill will bury platforms like eBay and Amazon in a mountain of red tape. How much red tape is anyone's guess. Unlike the dozens of tax bills that have been waved through this place since I have been here, this bill includes no regulation impact statement and hence has no estimate of the red tape burden being piled on. This is extraordinary. At the exact time that we need a regulatory impact statement, the regulatory impact statement goes missing. A cynic would suspect there is something to hide.
It is hard to imagine how eBay could possibly collect GST. Suppose Yankee John Doe is selling a product on eBay and Aussie Joe Bloggs is interested. Does eBay tell Yankee John Doe that he will receive only 10 elevenths of the winning bid if the winning bidder happens to be Australian? Or does eBay tell Aussie Joe Bloggs that if he puts in the winning bid he will have to pay 10 per cent more? And how is eBay to know whether what is being sold by Yankee John Doe is new or second-hand? Or do we just assume eBay takes a 10 per cent hit every time someone sells something to an Australian? Perhaps eBay should sell to Australians only goods that cost more than $1,000, so Border Force will be responsible for collecting the GST and not eBay.
Given this complexity, some platforms might just refuse to facilitate sales to Australians while those that have no presence in Australia will almost certainly just ignore Australian tax law. The ATO will not be able to do anything about it—and of course those platforms are not likely to bother with payment protection or other safeguards against scams. Either way, the Australian consumer loses. Even if the commencement of the bill is delayed—and I will support the motion to delay it—it would be the height of irresponsibility for the Liberals and Labor to wave into law this radical new approach to the GST, given the absence of any information on the resulting red tape burden and the costs for Australian consumers. To coin a phrase from a Senate colleague, please explain.
I endorse some of the comments that Senator Leyonhjelm made in respect of the botched policy process that has led to the Treasury Laws Amendment (GST Low Value Goods) Bill 2017 coming before the chamber. Senator Leyonhjelm has talked about the lack of a regulatory impact statement which is just one of the problems associated with this bill.
I want to make some introductory comments in relation to the fact that this unfortunately is not the first time that this government has botched a consultation process and a policy process. In fact, it is beyond my comprehension that many people in the media consider the coalition to be the more credible economic managers. That mythology is not supported by the facts. I have made it my mission in this place to highlight some of the areas in which this government has been shambolic and chaotic when it comes to economic management. I have mentioned on a number of occasions the mythology that this government is always going to levy less tax on the Australian taxpayers, and how this mythology—which they always try to perpetuate—does not stand up to scrutiny. There is the fact, that since 1980, ten of the years with the lowest level of tax as a proportion of GDP were Labor government years. When it comes to the highest years since 1980 with tax as a proportion of GDP, eight of those 10 years were under the coalition. So this is another area of mythology.
When it comes to orderly development of tax policy in this country, we had some glimmer of hope under the previous Treasurer that we would have a tax white paper and a tax green paper following the Intergenerational report, and that there would be a holistic look at the tax system. But, lo and behold, we find that upon Mr Turnbull coming into the office of Prime Minister that was all scrapped, and all of the effort that was put into putting together a holistic review of our taxation system, which I think everybody was welcoming, was basically scrapped in the name of political expediency. At the time, the Chairman to the Board of Taxation, Mr Michael Andrew, talked about the fact that the process had cost at least $7 million in terms of working towards a tax white paper. In addition, we see the wasting of time, effort and money of 1,000 Australian stakeholders and business organisations who contributed to the review of our taxation system. Having basically scrapped that process, Mr Turnbull—who promised that he would have more credible economic leadership than his predecessor—floated ideas about increasing the GST, about the states assuming taxation powers and about the Commonwealth walking away from funding public schools. This was chaotic economic management.
When it comes to the issue of spending, I have said on a number of occasions in this place—and I remind the chamber constantly—that the International Monetary Fund working group identified the profligacy in the Australian system as being on the government side not on the Labor side. In fact, it was Prime Minister Howard who was found to be profligate in his spending in two periods of his term of office. When it comes to spending, I know there are senators on the other side who shake their heads that in 2013 one of the early acts of economic management of this government was to remove Labor's gross debt cap of $300 billion. Last week we crashed through the $500 billion mark. We expect to go through the $600 billion level at the end of this decade, and we are expecting to hit $725 billion in gross debt in 10 years time, with no peak in sight. So, when it comes to economic management this government's record is in tatters, and I hope that the mythology associated with the coalition's economic record is finally debunked.
Once again, as I said, the Treasurer has botched the policy process and it falls to Labor to step in and fix up the mess. Coalition governments, under both Prime Minister Abbott and Prime Minister Turnbull, derailed a genuine process that was started under the previous Labor government. The end result after all these years is a bill with numerous problems and plenty of unanswered questions about whether it is the best way to lower the threshold for the GST on online purchases.
It is a shame that after the backpacker tax debacle we have to have another piece of legislation put forward by the Treasurer that, again, has so many problems. I want to make the point that Labor supports the concept of evening up the playing field as regards Australian online businesses and overseas online businesses. In principle, that is something that should happen. This bill is not the answer to that problem. To fix this low-value GST situation, Labor will be moving amendments to delay the commencement of the legislation by 12 months while requiring the Productivity Commission to conduct a short inquiry on implementation and other GST collection models.
I want to note the sensible comments made by Senator Macdonald in relation to the delay of the commencement of the legislation. I also note his concerns about the method chosen in this bill as to whether it is the right method. On our side of the chamber, we certainly see that that is a problem with the bill. The Productivity Commission is well placed to review the package and ensure that we have a framework where compliance is high and there are no significant adverse consumer outcomes.
Before going into the detail of the bill, for the benefit of the Senate I think it is appropriate to state for the record a few points about the history of this issue. There has been some good work done previously, which has been recklessly abandoned. The Senate Standing Committee on Economics' inquiry identified many of the problems with the bill. The outcome was that we had a government-dominated committee, the Economics Legislation Committee, which supported a delay. And of course, Labor's sensible position—supporting the legislation—provided that there be a 12-month delay and a Productivity Commission review. Those are very important caveats.
The bill has a long history and was reviewed by the Productivity Commission in 2011. In their report, Economic structure and performance of the Australian retail industry, the commission highlighted the need for tax neutrality while also collecting the levy:
As the GST is a broad based consumption tax the LVT should, in principle, be reduced to a low level to ensure tax neutrality. But the costs of collecting additional revenues must be balanced against the gains from removing the distortion.
This led to a strong recommendation to establish a task force to find a workable model. The recommendation was very clear:
The government should establish a task force charged with investigating new approaches to the processing of low-value imported parcels, particularly those in the international mail stream, and recommending a new process which would deliver significant improvements and efficiencies in handling. The task force should comprise independent members, with the Australian Customs and Border Protection Service (Custom), the Australian Quarantine and Inspection Service (AQIS), Australia Post and the Conference of Asia Pacific Express Carriers providing advice.
Following the Productivity Commission report, a task force was established and a final report delivered in July 2012 that considered a number of options and issues that needed to be addressed. To show how detailed that report was, it stated:
In considering which of these potential solutions may fit within an integrated package of reform, assessments at both the initial and detailed costing stage are undertaken based on criteria derived from this investigation's terms of reference. The criteria include cost, efficiency, implementation, competitive neutrality, risk, revenue impact and legislative impact. Regard is also given to Australia's interaction with the digital economy and Australia Post's profitability. Not all criteria are relevant to the assessment of every solution, nor are they applied prescriptively.
The report then went on to supply a new, streamlined model of GST collection by logistics companies, a so-called 'logistics model'—which I note Senator Macdonald has some sympathy for—although this simplicity does not give credit to the substantial amount of analysis and the detailed recommendations that sit behind these words.
The previous Labor government then took steps to develop and implement this model in 2013. What we saw from the coalition government in 2015 was a U-turn on all that work. The then Treasurer issued a media release stating:
At the meeting the Commonwealth Treasurer put forward a proposal that relies on a vendor registration model as a method of collecting the GST for the states and territories. As goods would not be stopped at the border, administering a vendor registration model would have a relatively low cost.
The so-called logistics model, with the backing of the Productivity Commission report and the task force report, was abandoned with little notice, and instead the so-called vendor model was embraced. No justification was offered for why this change had been made, and the Office of Best Practice Regulation stated that this announcement, without an accompanying regulatory impact statement, was in breach of their regulation guidelines—a point that Senator Leyonhjelm has identified.
Fast forwarding to 2017, in March the legislation was introduced into parliament. It is far from ideal when we have an announcement in 2015, yet in March 2017 the legislation is introduced and the start date remains 1 July 2017. It does not give much time for scrutiny or for stakeholders to prepare for this new measure. The government seems to have wanted the parliament to just wave this legislation through. Labor sensibly wanted it to be referred to the Senate Economics Legislation Committee, and this bill is a clear example of how important these committees are when we have a government and a Treasurer introducing legislation like this.
The work of the committee culminated in a hearing in April, where we heard from Treasury officials as well as stakeholders on all sides of the debate. To start, I confirm that the Treasury had still, in 2017, not released the regulatory impact statement, and Treasury also admitted that the lack of a RIS was in breach of the Office of Best Practice Regulation guidelines. It was very concerning to hear that the Turnbull government had botched its own policy process in developing this bill. The hearing started with this revelation, and the news only went downhill from there. No explanations were offered by the government for the decision to move away from the recommendations set out in chapter 7 of the 2011 Productivity Commission report Economic structure and performance of the Australian retail industry and the subsequent Low Value Parcel Processing Taskforce: final report. There are still no answers after all these years.
In relation to the 1 July 2017 start date, Treasury officials declined to answer questions about whether alternative start dates had been modelled. Witnesses from the Australian Retailers Association, online retailers, the Conference of Asia Pacific Express Carriers and the Freight & Trade Alliance all expressed concerns about the 1 July 2017 start date. Even the supporters of this bill have concerns. EBay claimed that Treasury officials had told them they expected a 25 to 30 per cent compliance rate from the model set out in this legislation. Treasury officials later stated that they expected this compliance rate in the third year of operation and that it would reach maturity in 2022-23 at 54 per cent. So the government has clearly overstated the benefits of this bill. If 54 per cent is the best that can be achieved, it does not appear that this bill actually delivers on the objective of levelling the playing field for Australian retailers, who are struggling.
In another worrying sign, some of the online platform companies did not rule out geoblocking Australians and preventing them entirely from purchasing from overseas vendors. EBay stated:
Because we do not want to violate the law, we may have to stop all overseas sellers from selling to Australians. Of course, it will hurt our business significantly. I want to make it clear that we are not threatening; I just want you to know how significant an impact this bill will cause to our business.
Etsy also made similar comments, stating:
Because of the scaling complexity of this task, quite honestly, we are left with a number of unfavourable options. It is absolutely our worst-case scenario that we would have to do this, because, as I mentioned earlier, the revenue from our Etsy sellers is essential revenue. These are typically women at home who are full-time carers. This revenue counts for them, so blocking them from being able to achieve a sale like that is, frankly, devastating for us and for our business model.
Alibaba made comments along the lines:
Alibaba Group has done some preliminary work looking at this bill, and is of the view that it may not be able to be applied to AliExpress. If that were the case, we would have no choice but to geoblock Australian users from using the AliExpress platform.
And they had not provided any costing in relation to that. These potential impacts of a reduced variety of products, reduced competition and higher consumer prices are clearly possible consequences of this bill, and it is important that adverse consumer outcomes like this are avoided.
There were not many friends to be found for this bill during the hearing. Even witnesses normally supportive of government policy, such as Dr Berg and Professor Davisdon, associated with the IPA, gave the tax zero out of 10. They said:
The idea that 3,000 firms are just going to voluntarily stump up on this policy when there is really no direct enforcement mechanism seems to us a bit fantastical.
On this point of compliance the ATO, lumbered with a vague plan by the government, were left to explain that jurisdictions like the USA and China will not enforce the measure on their behalf. Platform compliance is largely reliant on the goodwill of overseas operators. Even the Retailers Association, a strong supporter of this bill, noted in their submission:
Our main concern is the speedy implementation of the policy with proposed registration and other measures needing time to be set up and enforced.
The logistics companies concurred with this issue of the start date, given the need to have their information systems modified to comply with the legislation. The public hearing clearly showed that the Treasurer had failed to properly consult with stakeholders and develop a workable model for taxing low-value imports. The hearing exposed numerous problems with this bill, and it clearly was not good enough in its proposed form.
The outcome of that inquiry was that we saw a government-dominated committee requesting a delay. Clearly, the issues did not just concern the Labor Party. The final committee report, in an unusual move, recommended the commencement date be amended to 1 July 2018. Indeed, in the words of my colleague Senator Hume in the media:
I think a delay in implementation is probably a good compromise solution. It's quite understandable that those companies to whom it applies wouldn't be prepared or have made the necessary changes until after the legislation was actually passed.
The final report also notes concerns expressed about the proposed implementation date and the complexity of implementation and enforcement. It accepts that business may need more time and assistance to develop their systems to implement the measure.
Labor also set out in the report its bipartisan in-principle approach to this bill to delay the start date and to have a review completed so that the best model could be adopted, the playing field could be properly levelled and that suitable consumer outcomes could be maintained. We maintain our position today that we are willing to find a way forward to level the playing field for Australian retailers, to have a taxation system with high compliance and for suitable consumer outcomes to be maintained. However, given the state of the bill and its numerous problems, we have no choice but to step in and give the affected stakeholders, the government and the parliament another chance to fix the Treasurer's mishandling of the GST low-value threshold legislation. Given the Productivity Commission's previous work into the collection of GST on online purchases, it is well placed to review the model. The Labor Party stands ready to find a way forward on this legislation. It is important to get the policy right.
Let us not gild the lily: this is a great big new tax on consumers, no matter how the government wants to dress it up and the opposition says they do not support it—they do. This is going to result in higher prices for everyday Australians. I do not think that is justified. It is not about protecting or preserving the domestic retail sector, it is not about getting a better deal for the mums and dads of Australia; it is about providing more revenue to government, because they cannot and will not live within their means. My position, the Australian Conservative position, is quite straightforward: Australians already pay enough tax. We do not spend their tax dollars wisely enough to ask them to give us any more. The spendthrift nature of the former Labor administrations and the existing coalition administration is extraordinary and is doing a huge disservice to our country and our children. We are collectively accumulating hundreds of billions of dollars worth of debt, which we are going to ask future taxpayers to fund, and we are doing it because we are not prepared to live within our means today.
The government and the opposition will dress up this big new tax on consumers as an equity measure to protect the Australian retail sector. If they were serious about ensuring a thriving retail sector in Australia, they would look towards cutting the regulation and bureaucracy attached to running, owning and operating a business in this country, which are a direct result of the policies implemented by those on the other side and those on this side of the chamber. Government policy is directly responsible for the massive electricity prices affecting every business and every consumer around the country. You want a more effective and economic retail sector? Cut those regulations and allow their electricity and utility prices to be lower; cut the regulations and red tape attached to employing people and allow more competition.
If you want an example of competition, Coles and Woolworths do Australians a massive disservice in the retail sector. They were selling products at a massive mark-up, far higher than the pricing of their international peers. They are under pressure now because their inefficient models, which were ripping off consumers, have been exposed by the likes of Costco and ALDI. I went out to Costco last week. The shopping experience may be different, but the prices are lower, because they are more competitive. If you cut competition, you are going to have a more uncompetitive environment. We need more competition in this country. We need the likes of Amazon to come in here to keep our retailers honest. No longer is it acceptable for them to engorge themselves at the Australian consumer's expense, when we are paying much more for products than it would cost to obtain them internationally.
What is the response? It is not to cut regulation but to put a new tax that is going to be paid by the Australian people. I am absolutely in principle opposed to that. That is why I do not support this bill. It is also a problem with the concept surrounding this bill. After Bert Kelly—and I note the Modest Member society chairman here—rather unfashionably first did so, we have argued for decades that free markets are good and tariffs are bad; now we are back to arguing for a new tariff. You can call it whatever you like, but it is a tariff. It is a tariff on low value purchases from overseas.
More importantly, the tariff is going to be cumbersome and unwieldy to implement and is going to raise a whole range of questions. Who pays it? Is it collected by the retailer overseas? Should it be collected by the transport agency here?
Is it going to apply to second-hand goods? I can game the system already: if I were an overseas retailer, I would transfer it to a second retailer and call it second-hand. I would even repackage it to save money. There are a whole bunch of ways this could be scammed and gamed, because government are trying to be too clever. What is it that the government have against people being able to obtain goods for less money? If they are that opposed to consumers' interests, my message to them is that they are once again putting their own inability to cut the cost of government and to cut the expenses and the programs of government ahead of the interests of Australian people.
This is wrong in principle. The concept of it is wrong and overturns what I thought was decades of learned wisdom about getting more benefits. It undermines the principle of competition, and the execution of this is, quite frankly, diabolical. Here we are with a big new tax where the government do not really know how they are going to collect it or how they want to collect it, and this new tax is only a couple of weeks from being implemented. That is why, when the opposition seek to delay this tax for a year, I will be supporting that delay. I am happy to delay it for 10 or 12 years if it helps them to get to a better answer and a better outcome. But, ultimately, I will be voting against this bill in whatever shape or form it is. I am not here to put taxes up; I am here to cut the cost of regulation for businesses and for consumers. I am here to drive prices down so that people get better value not only from government—where we should be lowering taxes—but from the retailers, who have been feasting at our expense for a very long time.
Anyone who has been overseas and has gone into the apparel industry in America or Europe knows that you can buy things for much less there than you can in this country, and it is not because they are made in America or in Europe; it is because the regulations attached to selling those items allow for a more competitive environment and a more competitive market. I believe Australian consumers deserve better value from their retail sector. It is up to government to provide that environment by cutting the cost of doing business, not imposing new taxes on those who seek to get the best possible value for their money in a global environment.
I rise to speak today on behalf of the Australian Greens on the Treasury Laws Amendment (GST Low Value Goods) Bill 2017. Consistency is very important in politics, and the Greens have always had a very strong position of voting against GST when it was implemented. It is not a progressive tax. Members right around the country play a very important role in our policy formulation, and we do not support taxes that are not progressive. GST is a regressive tax. Every time there has been debate and discussion in this place about broadening the GST or increasing the rate of the GST, the Greens have consistently opposed it. Rather than just opposition, we have always embarked on proposition. We have always found other proposals and other ways to raise revenue in this country, and we are all for raising revenue, but we would like to see it done in a fair and equitable manner. We do not believe the GST is a fair and equitable tax. Hence, on applying it to low-value goods, we will again take the consistent position that will be opposing this bill today. We do not support GST as a fundamental principle, and we will not be supporting the bill today.
However, I would like to say there are other reasons for this. Even if that were not our policy position, there are other reasons that we would not be supporting this bill today. We do not believe that it is the right model. It is very important to be clear about this. Low-value imported goods are currently exempt from GST because, to date, it has not been considered worth the effort to collect the tax. It has not been considered worth the effort.
When we talk about the efficiencies of policies we look at how much it costs to implement, administer and enforce them and weigh that against the revenue benefit and potential economic benefit to get some kind of metric on efficiency. The proposition that the government has in the legislation before us today, certainly on all the evidence that I have heard, is not an efficient tax by any stretch of the imagination. In Mr Hockey's own 2015 tax white paper, he explained:
The exclusion from the GST base for imported services reflects how difficult it is to identify the supplier and recipient in a transaction because it has not occurred physically and, unlike imported goods, cannot be stopped at a border.
Everybody is clear about this: this is a very complex area. To put this simply, the Australian Taxation Office has better things to do than to go chasing $10 or $20 of GST here or there from literally tens of thousands of suppliers all over the world. The problem with this bill is that it does not seem to address that key fundamental problem. The vendor model that this bill proposes would require each of those tens of thousands of online retailers from all over the world to collect the tax for the tax office and then pass it on. We have already heard some contributions in here today about how difficult that is going to be and how easily that system will be gamed. I think it is fair to say that, even when you look at the explanatory memorandum that has been provided to senators, it has still not been made clear exactly how the ATO will do this. We have sympathy for the idea of parity and equity between domestic businesses and overseas businesses, for trying to ensure that our domestic retailers are not at a competitive disadvantage. But, as noted in an article in The Conversation by Kathrin Bain, from which I will read very shortly, it is still unclear exactly how much parity between domestic retailers and overseas retailers this is going to achieve.
One of the golden rules of taxes is that they have to be enforceable, and efficiently so. The Greens believe that the government should go back to the drawing board with this tax and get it right. It has been raised in here already that the government-dominated Economics Legislation Committee also recommended that this legislation not be implemented immediately; that there be a 12-month delay on the implementation, subject to getting it right. I find it quite ludicrous that we are here today to pass legislation that everybody seems to agree is second-rate. Why wouldn't we just get it right and then bring it back so that we can vote on legislation that we are all happy with?
That brings me to Labor's amendment. We have a choice, as a party, between voting for legislation that the government is likely to get up and have the numbers on, which begins immediately with a second-rate model, or supporting Labor's amendment to at least delay the legislation for 12 months and get the Productivity Commission to do a study. Of course, that does not bind the government. As Senator Cormann in the chamber here today knows, the government will look at the Productivity Commission's report. It may or may not take those recommendations on board. It has the discretion, as the executive, as to whether or not it wants to do that. So essentially we are, today, voting for the legislation to be implemented. Even a delay is no guarantee that we are going to this fix this and get it right. We can only hope that, if the Productivity Commission does look in detail at the differences between the models—for example, between the logistics model and the vendor model—and properly costs what it will take to administer and enforce the various regimes, perhaps the government will change this legislation and put up an amendment for us to all vote on. We would rather see that happen now. We would rather see the government get it right and bring it forward.
With that proposition in front of us, the Greens will be supporting Labor's amendment today. At least it gives us the opportunity to fix some of the mechanics of this bill and get it right. And I would hope that the government would take on board any recommendations by the Productivity Commission in that regard. We do believe there is merit in looking at the logistics model, which would collect the tax through distribution channels. I have met with various online retailers and other stakeholders, and I understand that this proposition has been raised at the legislative committee level and directly with Treasury and government. The merit of a logistics model is that there is a much smaller number—more likely a handful—of businesses through which imported goods are distributed, which makes it easier to administer. The ATO's task would be much simpler under this model and the model is also more likely to ensure that all imported goods are captured, whereas, with the vendor model in the legislation we have in front of us, you could drive jumbo jets through some of the holes in it. If we are trying to achieve parity, then that is not going to be the case.
I would like to go into a bit more detail as to why the proposed legislation does not set out to achieve its aim of levelling the playing field for our domestic retailers. It unfairly imposes GST on goods purchased from some overseas sellers that would not be subject to GST if purchased from an Australian seller. Kathrin Bain wrote an excellent article in The Conversation, on 21 April 2017, that explained some of the key or fundamental problems with this legislation. She said:
Currently, low-value imports (those with a customs value of A$1,000 or less) are exempt from GST. If the legislation is passed, overseas vendors who sell more than A$75,000 of low-value goods to Australian consumers would be required to register for GST, and collect and remit GST on low-value goods to the ATO.
Those imports will continue to be stopped at the border with any GST, customs duty, and associated fees paid to Australian Border Force by the importer before the goods are released.
For sellers of low-value goods it will mean that an overseas supplier of both low and high value goods will be subject to two separate tax regimes. The requirement to collect GST will apply only to low-value goods.
… … …
While extending the GST to these goods is meant to level the playing field between overseas and Australian vendors, treating the online marketplace or mail forwarder as the supplier of goods is inconsistent with the treatment of domestic transactions.
As eBay has stated in their submission to the Senate Committee: "eBay is not a seller. eBay is a third-party online marketplace that simply connects buyers and sellers".
For Australian vendors who sell items on eBay, it’s the individual seller who is responsible for collecting and remitting GST on products they sell (if they are required to be registered). A seller who uses eBay, but isn't carrying on an enterprise or does not meet the A$75,000 turnover threshold, isn't required to be registered and would not be required to collect GST on their sales.
She states further in regard to the proposed legislation we have before us today:
However, the proposed legislation does not treat overseas vendors in this way, by treating online marketplaces and mail forwarding services as the supplier of goods.
So it seems as though the legislation has missed the point. She states further:
… small, individual vendors should not (if their turnover of low-value goods into Australia is less than A$75,000) be required to collect GST merely because they use an online marketplace.
EBay has gone as far as stating in their submission that: "Regrettably, the Government's legislation may force eBay to prevent Australians from buying from foreign sellers". This is because they would not be able to comply with the requirements imposed under the new legislation.
We can talk more about the various amendments when we come to the committee stage. My colleague Senator Waters has moved an amendment already in relation to removing GST from female sanitary products, particularly tampons. We have had this discussion in here today and it is a very important issue for many Australians—nearly half. For some reason, the razorblades I used to shave this morning are GST exempt because they are deemed to be an essential item for my male hygiene, yet women's tampons are not considered to be an essential item under the GST law. Senator Waters has already given a great speech on this and we are very keen to see this issue fixed. Senator Dastyari, who is in the chamber the moment, has raised this issue at estimates. I know it is something the Labor Party feels strongly about. We look forward to having a discussion on that in committee.
Lastly—I cannot let this go unchallenged—some WA senators in here today have used this as an opportunity to talk about how hardly done by Western Australia is under the current GST calculations, with horizontal fiscal equalisation. Senator Smith, I say to you, through the chair, that since Federation Western Australia has been a recipient of the generosity of the other states. This is what fiscal equalisation was set up to do. It is actually extremely complex in terms of the calculations and the assumptions we make, but the principle behind it is really simple. It is about equality around our country. It is about the wealthier states transferring their wealth to help the poorer states. At different times since Federation different states have been donor states under these calculations and different states have been recipients. Throughout nearly all of its history WA has been a recipient of GST and other revenue from the Commonwealth. Through two mining booms, suddenly they are a donor state. They are very likely to be a recipient state again shortly, I understand, Senator Smith. If you squandered the benefits of the mining boom, do not come crying to the federal Senate to try and fix this problem for you. I can tell you that in my home state of Tasmania, when the exchange rate went to $1.15 against the US dollar—we rely on exports from our state. It is ironic that we have an excellent Western Australian senator in the chair at the moment, and this is good.
He has been gagged by his side, has he? It is a bit rich—pardon the pun—for Senator Smith and all Western Australian senators to come in here and whinge that they been hard done by, when since Federation they have been looked after by wealthier states. If anyone had a reason to have a whinge it would probably be New South Wales, one of the wealthier states.
I have taken my great-grandfather's diary and walked his steps in the Somme and the battlefields of World War I, and I know that Tasmanian regiments fought for our federation alongside Western Australian regiments and other soldiers from different states. This is what federation is about. It is about the wealthier states supporting the poorer states at the right time when it is needed. That is why we are a federation. They would roll in their graves if they knew that Western Australia was being so greedy. The point I was making before, before I got distracted by Senator Smith, was that Western Australia had this mining boom. It hurt my state. That exchange rate—call it Dutch disease, whatever you want—impacted Tasmania quite severely. It really did hurt our agricultural exports. But we were not out there complaining and demanding money from Western Australia, which was reaping the benefits of the mining boom. It should have been better invested, may I say—
Senator Smith interjecting—
Senator Smith, if you want more revenue, here is my suggestion: fix the bloody petroleum resource rent tax, the PRRT. Fix it! That $238 billion of tax credits that we have given, predominantly off the coast of Western Australia, to some of the largest and wealthiest petroleum companies in the world—$238 billion and counting. Every dollar they spend on exploration or operational expenditure they get to uptick at rates of 15 per cent plus the bond rate, or five per cent plus the bond rate for operational expenditure. They can even claim the clean-up costs of oil spills. $238 billion of tax credits that they can write off against future income. Even if you tweak those numbers slightly, you will be able to raise tens of billions of dollars, which I am sure would help Western Australia and the rest of it. All it takes is a little bit of political courage to take on the big end of town. Do not try and take on my state and take money off Tasmania. We are doing very well at the moment, thank you very much. Our economy is doing quite nicely, because we have sailed through the difficult period when Western Australia made it very difficult for us, thanks to the high exchange rate, and we are now emerging from it. It is times like this that we can look and say, 'The system works; the system works very nicely, thank you very much.' And it has worked since our forefathers fought next to each other for our Federation in those overseas conflicts. That is why we are a Federation. The whole principle that was set up is the principle of equity. It is designed to transfer revenues between states—with the Commonwealth taking responsibility for that—to try to remove inequality around our country. That is what it was set up to do. It just happens to be your luck, Senator Smith, that your state—and Western Australia is my state too, in many ways—through the luck of the draw happened to inherit some of the richest mineral wealth in the world, underneath the ground and underneath the soil.
That was another spurious point of order. Nevertheless, I am a proud Tasmanian. My father is Tasmanian; my mother is Western Australia—I will put that on record. However, Senator Smith, the half of me that is Western Australian is very happy for you to be giving GST money to the other half of me that is Tasmanian. I make that very clear. But my point remains that for Western Australia and for the Western Australians who are lucky enough to live there, the soil under their feet—and under your thongs, Acting Deputy President Sterle—happens to contain some of the biggest mineral deposits in the world. It is just your luck that you happen to be born there and happen to be lucky enough to live there.
There are other parts of the country that do not have those natural advantages, and I would have thought it was perfectly natural that you would want to share those with the rest of the country. Perhaps you were a young Liberal, Senator Smith, and we all know what they say about young Liberals: the one thing that they have in common is that they learnt not to share. That is what they say about young Liberals, and perhaps Senator Smith has inherited such a trait. I am not saying that is the case, but it is possible. Federation is about sharing within our fantastic nation, supporting each other and giving each other a leg-up. On that note, I will get back to the bill. The Greens will not be supporting this bill today for the reasons I have outlined. We will look forward to further discussion during the committee stage on various amendments.