Almost 100 countries sign GST agreement: Pressure mounts on Australian government

Close to 100 countries have signed up to a new set of tax principles to govern how goods and services are taxed across borders.

 

But local retailers are unsure as to what kind of pressure the international consensus will have in Australia, where state and territory governments are yet to reach an agreement about changing the $1000 GST threshold for online purchases from offshore suppliers.

 

Representatives from 86 countries endorsed the guidelines from the Organisation for Economic Co-operation and Development in Tokyo, Japan, on April 18 as part of the OECD Global Forum on VAT.

 

The guidelines, which represent the first internationally agreed framework for applying value-added tax across national borders, aim to help countries avoid both double-taxation and under-taxation. The guidelines relate to two areas: VAT neutrality and ensuring taxes on business-to-business trade is services are destination-based.

 

The level at which GST is applied to online purchases from offshore suppliers in Australia is a hotly-contested issue, with many local retailers arguing that lowering the threshold from $1000 to a much smaller amount such as $20 would create a more even playing field.

 

The Productivity Commission examined the issue in 2011 but found that the cost of collecting GST on online purchases at a threshold of $20 would far outweigh the benefit.

 

Australian National Retailers Association executive director Russell Zimmerman told SmartCompany while there has been “robust discussion” on the topic between the federal government and retailers, he is unsure as to how much pressure the OECD guidelines will have added to the local debate.

 

However, Zimmerman said the endorsement “does show that every country is concerned” about international tax arrangements.

 

Zimmerman said the OECD guidelines may have more of an impact on multinational companies who use corporate structures across various territories to attempt to avoid their tax obligations.

 

State and territory ministers were due to make a decision about the threshold in March but an agreement was hampered by the elections in Tasmania and South Australia. “It’s fair to say that the issue will go to another cabinet meeting,” says Zimmerman of the next step.

 

Zimmerman said the ARA hopes the recent elevation to NSW Premier of former treasurer Mike Baird, a strong supporter of lowering the GST threshold, will spur the debate.

 

This story first appeared on SmartCompany

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