OECD nations gang up on internet retailers, tax dodgers
Australia to fine tech tax-dodgers 100% of their avoided tax, plus profits
Australia's treasurer* Joe Hockey has revealed that he and other money ministers from the Organisation for Economic Co-operation and Development (OECD) have shared plans to have online retailers charging the appropriate consumption tax on intangibles and goods bought online, at the rate of the buyer's home nations.
Australia's consumption tax, the Goods and Services Tax (GST), only applies to imports sold for AU$1,000 or more. Local retailers can't avoid charging GST, so have complained they are at a disadvantage. Sellers of intangibles movie downloads, games and e-books have been able to sell in Australian Dollars without charging GST, again helping them to compete on price in Australia.
Like many nations, Australia's not flush with funds at present so is looking for services of revenue. Hockey therefore announced today, on the eve of Australia's budget, that the nation will attempt to ensure that that online retailers collect GST at Australia's rate of ten per cent.
Hockey also said he's discussed these arrangements with his opposite numbers at the April G20 Finance Ministers and Central Bank Governors Meeting. Ministers there were keen on the idea, he said, and Japan, Norway, South Korea, Switzerland and member countries of the European Union are looking at similar plans.
“Some” online sellers have agreed to the proposal, he said, adding that he hopes the OECD can round up recalcitrants.
Hockey said most online sellers are already collecting consumption tax in their home markets, so asking them to do the same for export sales shouldn't be seen as a nasty compliance burden. The treasurer wouldn't name names, but said the companies targeted are overwhelmingly based on the west coast of the United States.
Australia's treasurer also said finance ministers from around the world are interested in bills; he has spent 18 months targeting multinational tax avoidance. Hockey's bill proposes fines of 100 per cent of avoided tax, plus the tax owed, for businesses that structure their affairs in ways obviously aimed at minimising tax through offshore transfers.
The bill is likely aimed at Microsoft, Apple and Google, all of which were recently grilled by Australia's parliament about their affairs. Hockey said the bill targets 30 entities and that Australia expects to recover “billions” each year with the proposed law.
The law will target companies found to be “avoiding a taxable presence” or which use “inflated transfer pricing.” Microsoft and Google, both of which book products and services sold in Australia through a Singaporean entity, appear to fall within the first category. Apple Australia, which pays associated Apple entities for products resold in Australia at rates it says takes into account global development and marketing costs, looks to be in the cross-hairs under the second.
Hockey hopes the laws will come into force on January 1st, 2016, giving organisations time to create new and compliant structures. He's also said Australia doesn't need a "diverted products tax" as adopted in the UK, as this approach goes further than the UK model.
Hockey's suggestion that he's shared Australia's legislation with colleagues from around the world is plausible as Australia chaired the G20 in 2014 and hosted its summit meeting. He would therefore have been in a position to bend the ears of finance ministers from around the world, and set agendas for their closed-door discussions.
Taxing only digital goods will anger bricks and mortar retailers, who in Australia have argued for a lower GST-free import threshold. Australia's Productivity Commission, however, has modelled a lower threshold and found it would cost more to administer than it would raise. Taxing intangibles is expected to raise AU$350m over four years. ®
How Australia will target multinational tax evaders
*A position comparable to the chancellor of the exchequer or the secretary of the treasury