In an agreement reached with the members of the Organisation for Economic Cooperation and Development (OECD) in Tokyo in April, it was agreed that a global “ground rule” for the taxing of online content should be that low value online content be subject to GST/VAT in the same way that other goods and services are taxed. In this Alert, Special Counsel Justin Byrne and Senior Associate Rosalie Cattermole summarise the recent discussions regarding the enforcement of new GST legislation.
The question remains whether Australia will adopt this “ground rule”, and if so, in what guise. Australia is a member of the OECD and, broadly, adopts OECD guidelines. A debate has been raging for some time in Australia, led by the large retail groups, that the current $1,000 GST exemption for the importation of online goods be scrapped. The argument is that this would create a level playing field between foreign and domestic service providers, who must charge GST on sales of goods and services under $1,000.
The difficulty with implementing the ground rule, however, is that the cost of enforcing compliance is exorbitant. In fact figures released to the public indicate that the cost of the measure will exceed the GST revenue to be generated by it.
It remains to be seen whether Australia will adopt the OECD “ground rule”, and if so, how, practically. The issue may be considered as part of the Government’s “white paper” on taxation reform, which it has stated will be released to the public for comment prior to the next Federal election.