THE World Customs Organisation (WCO) has an ambitious work plan for ecommerce focusing on trade facilitation and simplification, safety and security, revenue collection models and “big data.”
In Australia alone, e-commerce revenue is expected to show an annual growth rate of 8.8% from 2018-2022, resulting in a market volume of US$16BN by 2022.
Effective July 1,2018, the Treasury Laws Amendment (2017 Measures No. 1) Bill 2017 introduces a requirement for overseas vendors, electronic distribution platforms and re-deliverers to account for Goods and Services Tax (GST) on sales of low value goods to consumers in Australia if they have GST turnover of $75,000 or more.
The intent being to ensure that imported goods with a value under $1000 face an equivalent GST treatment to goods sourced in Australia. Importantly, the legislation will also generate a significant quantum of GST revenue for our state governments.
It looks like Australia is not going alone with this approach on taxing internet trade with the Council of the European Union also introducing new rules to comply with value-added tax (VAT) obligations.
As a part of the EU’s “digital single market” strategy, the proposals are aimed at facilitating the collection of VAT when consumers buy goods and services online. Most goods that are imported for distance sales currently enter the EU VAT-free. The Council sees this as resulting in unfair competition for EU businesses.
“This revamp of the rules will make our VAT system fit for the digital economy,” said Toomas Tõniste, Minister for Finance of Estonia, which currently holds the Council presidency. “By reducing red tape, we will achieve both cost savings for businesses and increased tax revenues for the member states.”
The new rules extend an existing EU-wide portal for the VAT registration of distance sales. Following the Australian style model, the EU is making the online platforms liable for collecting VAT on the distance sales that they facilitate.
A “one-stop shop” will relieve online traders of having to register for VAT in each of the member states in which they sell goods. Again, similar to the Australian model, the Council provides a concession for start-ups and SMEs. Below €10 000 in yearly cross-border online sales, a business will be able to continue applying VAT rules used in its home country.
Furthermore, the new rules remove an exemption for consignments from outside the EU worth less than €22. The Council claims that around 150 million small consignments are imported free of VAT, and the current system is open to abuse. “Whilst EU businesses have to apply VAT regardless of the value of the goods sold, imported goods benefit from the exemption and are often undervalued in order to do so.”
The new rules set out the following timeline:
- introduction by 2019 of simplification measures for intra-EU sales of electronic services;
- extension by 2021 of the one-stop shop to distance sales of goods, both intra-EU and from third countries, as well as the elimination of the VAT exemption for small consignments.
The global developments do not end there.
The WCO established e-commerce sub-groups that held face-to-face meetings in Brussels from 23 to 25 January 2018, bringing together more than 125 delegates from Customs administrations, other government agencies, international organisations, e-vendors/platforms, express service providers, postal operators, freight forwarders, customs brokers and academia to discuss and develop a ‘Framework of Standards on Cross-Border E-Commerce’.
This ‘Framework of Standards’ is expected to be a comprehensive instrument for assisting WCO Members in developing E-Commerce strategic and operational frameworks. It will be equally useful for Members who are seeking to enhance existing frameworks in order to effectively meet the requirements of new and evolving business models.
- ATO website – https://www.ato.gov.au/business/international-tax-for-business/gst-on-low-value-imported-goods/
- Council of the European Union – http://www.consilium.europa.eu/en/press/press-releases/2017/12/05/vat-on-electronic-commerce-new-rules-adopted/
- WCO website – http://www.wcoomd.org/en/media/newsroom/2018/january/wco-lays-down-the-foundation-of-a-framework-of-standards.aspx
Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) look forward to facilitating a focused e-commerce session on Day 2 (11 May 2018) of the Global Shippers Forum and ICHCA International Conference & Exhibition – Melbourne Convention & Exhibition Centre – the session includes a panel discussion and presentations from Maggie Zhou – Managing Director for Australia and New Zealand, Alibaba Group; Ana Hinojosa – Director- Compliance and Trade Facilitation, WCO and Australian Taxation Office executives – further details are available at www.FTAlliance.com.au
Travis Brooks-Garrett – Freight & Trade Alliance (FTA) www.FTAlliance.com.au