The internet giant Amazon has attacked the Turnbull government’s plan to impose the GST on all online purchases, saying it is so poorly designed it will create an “inherent disincentive” to comply.
It says the government should be asking Australia Post to collect GST on goods imported to Australia, rather than forcing websites such as Amazon and eBay to do so.
It has questioned how the government came up with its proposed GST collection model, saying a previous government taskforce recommended a superior model in 2011.
The Senate standing committee on economics will hold a public hearing on the bill on Friday.
In its submission to a Senate inquiry, Amazon has said it supports the principle of removing the GST concession for all low-value goods bought online from overseas and imported to Australia.
At the moment, imports of goods worth less than $1,000 are GST-free – including clothing, books, electronic devices and sports equipment.
The government wants to abolish the concession to “level the playing field” for bricks-and-mortar stores, after years of lobbying from retailers such as Gerry Harvey. But it wants online giants such as Amazon and eBay to collect GST for the commonwealth using a so-called “vendor model”.
A vendor model would require that, where Australian consumers have bought products online from offshore suppliers, the responsibility for collecting GST would lie with the seller, the electronic distribution platform or the re-deliverer, depending on the nature of the transaction.
Amazon has heavily criticised the plan, saying it would be impossible to enforce and create serious distortions.
“The bill imposes an administrative burden on sellers and electronic distribution platforms, which will create an inherent disincentive for them to comply,” its submission says. “It will create, rather than remove, distortions in pricing due to its lack of efficient mechanisms to require registration of vendors, detect non-compliance and ensure collection of GST on goods as they enter Australia.
“While compliant sellers and electronic distribution platforms will charge GST, non-compliant sellers and electronic distribution platforms will be able to ship parcels to Australia at prices that appear more attractive to the consumer, with low risk of detection.
“This incentivises consumers to buy from less reputable overseas vendors, at increased risk.”
Amazon said the government should instead use a so-called “logistics model” to collect GST on online purchases.
A logistics model would require Australia Post (and express carriers and freight forwarders) to collect GST instead.
“Logistics providers already have infrastructure in place to collect information on goods coming into Australia and have well-established processes for GST collection for goods valued at more than $1,000,” Amazon’s submission says.
It also wonders why the government has provided no rationale for ignoring a recommendation from a previous government taskforce to use a logistics model to collect GST.
“When the Australian government’s Low Value Parcel Processing Taskforce considered GST collection models in detail in 2012, it opted for the logistics model,” the submission says.
“It is unclear why the Australian government has now selected an untested model in spite of previous analysis indicating that the logistics model is the superior option.
“Amazon requests that the analysis supporting the decision to abandon the logistics model and adopt the hybrid vendor model be made publicly available so that the rationale for such a major change in policy direction can be understood.”
Gary Elphick, the chief executive of Sydney-based company Disrupt Sports, has said the government’s proposed model shows a “fundamental” lack of understanding about how online markets work.