Visa has ruled itself out of collecting GST for the Government on online purchases made by Australians, saying the accurate technology to do so does not exist, and agreeing to the request would leave the card giant vulnerable to reputational and legal risk.
Visa has told the Productivity Commission that were it asked to collect the tax on goods purchased from outside of Australia and pass that money onto the Government, the amount collected would “frequently be incorrect”.
“While we obviously cannot comment on the position of other financial intermediaries, in short, Visa is of the view that we could not perform this function,” Visa head of public affairs Australia, New Zealand and South Pacific, Adam Wand told the PC, adding that Visa does not perform this role for any other jurisdiction.
“The core reason for our inability to perform such a function is that no technical data solution exists to deliver the suggested collection outcome.”
“It is important to also note that no Visa-controlled steps exist that would change this situation.”
By way of example, Wand says for a $122.50 purchase by an Australian from an online trader based in Germany, it is “not possible to extrapolate that the imposition of a 10% GST levy would require the transaction to be increased by $12.25, as the original amount of $122.50 will almost certainly have been made up of goods, some of which may have been and some of which may not have been subject to GST.”
“In addition, the total transaction amount would include payments of local taxes and charges, shipping costs, any local credit or debit card usage surcharges, dynamic currency conversion fees and exchange rate costs, among many other things,” Wand writes.
He adds that with Visa cards being accepted in more than 200 different jurisdictions, “the quality of the merchant and acquirer entered data across many of these jurisdictions varies widely in terms of content and accuracy” so the technical data upon which it would attempt to collect any additional charges would not be relied upon to be “complete or accurate”.
Wand adds that Visa was “deeply concerned about the litigation risk that could arise should an importation GST collection function be imposed upon us.”
“Should we be requested or required to do so regardless of this stated fact, it is almost certain that the GST amounts collected would frequently be incorrect.”
“Equally, GST would likely be erroneously collected on a range of items that are GST-exempt.”
“These errors would expose Visa to considerable and unacceptable legal and also reputational risk,” Wand writes.
Meanwhile, underwear group Bras N Things has warned that retail is battling its toughest conditions in 20 years and more job losses are likely unless the Government forces people to pay GST on online purchases valued at less than $1,000 and addresses other structural issues.
Bras N things chief financial officer Gary Jenkins has told the Productivity Commission that “without the Government taking significant action in restructuring the retail industry, the impact on retailers and the economy as a whole will be significant. We will see many more retailers going out of business and a significant loss of jobs in the retail sector.”
Jenkins says that with the “influx of international e-tailing, Australian retailers are disadvantaged due to higher wages, additional compliance costs and restrictive trading hours, and imbalanced GST and duty taxation.”
“Other economies such as China, UK and Canada have created a ‘level playing field’ by ensuring that all overseas retailers are subject to the same VAT and duty regulations as local retail players,” Jenkins says.
“There is no reason why Australia should not implement a similar policy to create a neutral competitive retail system.”
Jenkins also called for regulated trading hours and standardised labour laws across the states and territories, saying companies are being distracted by administrative duties rather than working to increase sales.
And he says higher wages needed to be looked at. “This current wage structure is organised around the employees but does not take into account when customers want to shop,” Jenkins says.
“The peak shopping periods are weekday late nights (such as Thursdays) and weekend days. Yet due to the penalty rates (which can be as high as 250% of the standard rate) retailers are restricted in the way they can structure employees during this time.”
“However, even with deregulated trading, there needs to be significant revisions to the wage structure to create an attractive proposition for retailers,” he writes.
Bras N Things, which has more than 180 stores across Australia and more than 1,000 employees, was once nominated as an IPO hopeful this year.
The Productivity Commission will release its report on the retail industry this month.
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