GST: Hockey wants tax rules enforced on movies and other intangibles
MOVIES and other media services bought online from overseas sources soon will become more expensive as the Government tightens the collection of GST money.
And it is possible the entrenched resistance to lowering the $1000 GST threshold on goods bought online from overseas is about to collapse.
Federal Treasurer Joe Hockey and state counterparts today in Canberra discussed the indirect tax and how it was gathered and distributed. One result was a plan to increase the revenue raised by the GST without changing its 10 per cent rate or the list of items on which it is levied.
Mr Hockey said the aim was to enforce the “integrity” of the tax by ensuring all who should pay it, did, including offshore operators providing “intangibles”.
“There are a number of those companies that are prepared to charge the GST on the services they are putting into Australia but they want to know they are not at a competitive disadvantage,” said the Treasurer.
He said revenue from the tax, which goes to the states and territories, would increase if it was “applied right across the board to the delivery of information and licensing and so on over the internet as if it were delivered domestically”.
“I see those things as integrity measures for the tax base, not a broadening of the GST or an increase in the GST (rate), “ Mr Hockey told reporters, referring to what he called “a clear difference”.
All the states and, in practical terms, the Opposition would have to agree to any structural change to the tax’s basic features.
But that unanimity might soon be reached on the longstanding proposal to lower the $1000 threshold on goods bought overseas on the internet. No GST is charged on goods costing less than that.
The reason for the possible threshold changes is big, cash-starved and cranky — Western Australia.
The independent Commonwealth Grants Commission wants to reduce WA’s share of GST money in 2015-16 from around 38 cents in the dollar raised in the state by the tax to just below 30 cents.
“Western Australia has previously held out in relation to the low value threshold despite the best endeavours of many including (NSW Premier) Mike Baird,” said Mr Hockey.
“Western Australia has always held out on the basis that they would not support anything to do with the GST (because) a majority of it goes to other states.”
But that could change as the state faces a tough revenue outlook.
The reason is that two years ago when the three-year distribution formula for money raised by the tax was announced Western Australia was doing well from one another cash source — royalties from booming iron ore exports.
However, the price of ore has fallen dramatically. A recent federal forecast was it would now be $60 a tonne but today it is actually $43 a tonne, and no account had been made for that unforeseen drop.
Treasurer Hockey called the combination or plummeting mineral prices and the lower GST share a “perfect storm” for the state’s finances. Mr Hockey agreed with Perth sentiment that a return of less than one third of GST paid in that state failed “the fairness test” and was “an issue for the Federation”.
He told reporters WA was locked into paying for necessary infrastructure projects from depleted revenue.
But the governments of other states are less sympathetic and are vetoing any change to the Grants Commission allocations. State treasurers today accused Western Australia of not reforming its economy when it had the money to do so.
“There was no consensus, no consensus,” Mr Hockey said after talks with state treasurers last night and today.
“I think most Australians would considerate unreasonable that a state would have the situation where only 30 cents of every dollar spent on the GST by its citizens are sent back to that state
And he ruled out a special, one-off grant to Western Australia from the May Budget, indicating there simply wasn’t the money available.
Mr Hockey urged the state to introduce reforms other governments had used to boost economic activity, such as deregulating retail trading hours, privatising assets such as sections of the electricity industry, or getting rid of “a range of anomalies in business practices”.
And it appears he has agreement from the West Australian government to look at lowering the $1000 threshold.
The states have effectively been told to sort out the GST mess themselves and Mr Hockey will return to discussions after a coming overseas trip to consult major global economic institutions.