New Zealand’s Photographic Imaging Association, under the chairmanship of CR Kennedy NZ ‘s Gerard Emery, has been instrumental in exposing a major GST fraud perpetrated by offshore online retailers out of Hong Kong on the NZ online platform, Trade Me.
The fraudsters, the most prominent of which is UDS, which also sells into the Australian market, understate the cost of camera gear and phones so they ‘qualify’ as GST-free. NZ has a GST-free threshold of $400 until December 1, when it will come in to line with the Australian system, in which overseas retailers or their electronic distribution platforms (Ebay, Amazon, etc) are required to collect GST on all products sold, up to the value of $1000.
To uncover the scam, Gerard Emery and his colleagues began to purchase camera equipment from UDS and others themselves. They discovered that UDS was dodging GST on everything purchased. They brought the blatant deception to the attention of Trade Me – a heavy hitter in the Kiwi marketplace, recently sold for over NZ$2.5 billion – which responded that it had nothing whatsoever to do with it, and ‘it was Customs’ job to collect duty.’
And fortunately for New Zealand retailers, Customs did that job. It began checking parcels sent to New Zealanders from UDS and confiscating products with understated consignment notes – around $120,000 worth going to 100 customers. This put pressure on Trade Me as irate customers began demanding answers. Customs officials then jumped on to comment feeds explaining that Customs was holding customers phones and cameras and explaining why.
After three weeks being hammered by angry customers (who were largely supportive of the Customs initiative) Trade Me finally removed UDS and another seller, Blitz Trading, from the platform in July. Since then another site has been removed and others are under investigation.
NZ Customs claims that once the law is changed in December, platforms like Ebay and Trade Me will have a clear responsibility to determine whether a retailer is a local company or from overseas and collect GST on behalf of offshore businesses, and this will restrict the opportunities for GST evasion.
Meanwhile, across the dutch…
– However, it won’t make it impossible, if the Australian experience is anything to go by. Consumer Electronics website Channel News did a thorough investigation of dubious online transactions back in October last year, looking at a range of retailers mainly out of Hong Kong and found that some claimed to charge GST but didn’t appear to be registered to collect it and/or weren’t issuing tax invoices, and others were simply not complying at all.
There’s some speculation that more offshore retailers than ever are now flouting the tax laws, having realised the ATO is not actively enforcing them.
In Inside Imaging’s recent explorations of offshore retailers, more often than not tax invoices are not available even when the retailer states GST is included. It is almost impossible to establish whether an overseas retailer is actually registered to collect GST.
Ebay is collecting GST on some offshore transactions under $1000, but not others. We asked Ebay Australia to explain how this could be the case. It seems there’s a major loophole: So long as the retailer claims the products are already located in Australia prior to purchase, Ebay will not collect GST regardless of whether the retailer is located internationally or not.
Here’s eBay’s response in full:
As you’re aware, as a result of legislative changes, commencing in July 2018, GST is now applied to retail sales of low-value physical goods ($1000 or less) that have been imported to Australia and sold to consumers.
Under the changes, eBay is required to collect the GST for low value imports sold on our platform. There’s nothing sellers need to do for their eBay sales for this. eBay does this by confirming an item’s value (less than $1000), its current location (eg, Japan) and its shipping address (somewhere in Australia). Once these criteria are met the GST is collected and remitted to the ATO.
For items in Australia however, responsibility for charging GST is wholly the responsibility of the seller. (Our emphasis.)
We have reviewed the sellers you identified and both indicate that their products are located in Australia. As a result, eBay has no role or visibility in the way they manage GST or their other tax affairs.
(We mentioned two offshore retailers to Ebay – Oz Digital Online and Brilliant Channel HK Ltd – where Ebay was not collecting GST, and one – T-Dimension – where GST was added to the product at checkout. There are quite a few other HK-based retailers claiming to have stock located in Australia.)
Ebay continued: Our tax policy makes it clear that when you sell on eBay you have the responsibility ensure you meet all tax requirements: https://www.ebay.com.au/help/policies/selling-policies/tax-policy?id=4348.
EBay does cooperate with the ATO in its investigations and regularly reports suspicious activity on the platform. We also encourage people to report to the ATO any businesses they suspect of being non-compliant with their tax obligations.
As we don’t have an industry association in Australia, photo businesses will need to be doing it for themselves, to paraphrase the old Aretha Franklin song. Here’s something from the ATO on the issue:
‘Detailed information is available on our website: www.ato.gov.au/AusGST and our compliance approach at: www.ato.govau/AusGSTCompliance
‘If anyone suspect cases of non-compliance with tax laws, they can report their concerns to the ATO at https://www.ato.gov.au/General/Gen/Report-a-concern/ or by calling 1800 060 062.’
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