E-commerce’s success has made it a target for the taxman. National governments are wrestling with the problem (real or perceived) that international e-commerce is undermining the tax base and disadvantaging local businesses.
Inbound international parcels that were once exempt from local taxes (in particular the local VAT) are under the microscope.
From July 1, 2018, GST (goods and services tax, currently 10%) will be charged on almost all overseas e-commerce purchases by Australian shoppers.
Suppliers with sales into Australia of over A$75,000 (US$59,000) per annum will be required to register for GST and remit the tax to the Australian Taxation Office.
Currently, inbound international parcels valued under A$1,000 (US$785) (a threshold set in 1985) are exempted from GST.
Shifting the threshold to zero will bring in an estimated extra A$300m (US$235m) in GST.
This tax collection model means that marketplaces including Amazon and eBay will have to collect GST – not the individual vendors who list in those marketplaces.
Amazon, eBay and co. aren’t happy with this arrangement, and suggest Australia Post collect the GST. Australia Post estimated it would cost the federal government A$900m (US$705m) pa for the post to collect GST on inbound international items.
Australia Post has dodged a bullet in not having to collect GST on inbound international items. As it is, Australia Post makes a loss on every international parcel it delivers.
From 1 March, VAT of 25% will be imposed on all mail items to Sweden from outside the EU Customs Union.
Additionally, Post Nord will charge a Skr75 (US$9.50) administrative fee for consignments with a declared value under Skr1,500 (US$185), and Skr125 (US$15.50) for consignments over Skr1,500 (US$185). This fee will cover the cost of making a customs declaration.
Where recipients refuse to pay the VAT and the fee, the consignment will be returned to sender.
UkrPoshta faces a diabolical government-imposed tax collection scheme from next year.
The new rule will limit consumers to three tax-free parcels per month, with a total value of over €150 (US$118). Subsequent parcels would be subject to 20% VAT, 10% import duty tax, and an excise tax.
Is there an opportunity or is it all pain?
While the post office network would benefit from processing tax payments for a fee, not to mention extra foot traffic, there would be significant stress on secure parcel storage space at post offices and delays in delivery.
Collecting payment at the doorstep from the addressee would involve posties carrying increasing amounts of cash, creating significant security concerns. This might not be a big issue in regions where electronic payments are prevalent but just the same the number of deliveries per hour will drop, and non-payment creates further delays and parcel returns.
For posts losing money on inbound international parcels, the prospect of fewer inbound international parcels thanks to increased taxes might sound quite attractive! Especially if sub-2kg (4.4 lb) parcels masquerading as letters were to be eliminated from international postal channels.
But the chaos and bureaucracy of collecting tax on behalf of the government could become a burden for the post office network and cause a poorer customer experience if not managed efficiently.
While it’s understandable that governments wish to mitigate the effects of tax minimization schemes run by some multinationals (who might headquarter their operations in tax-friendly countries), isn’t it simpler just to eliminate low tax deals offered by some European states?
Governments may be concerned that too many inbound international parcels are avoiding tax by using the (mainly Postal) tax-free thresholds, but piecemeal local initiatives only add complexity and confusion to international flows.
If governments really want to deal with this issue, surely this is a case for pan–EU harmonization both in terms of taxation of e-tailers and tax for low value inbound postal items?
Ian Kerr is the founder and host of the Postal Hub Podcast, the weekly podcast for the postal and delivery sectors.
Marek Różycki is managing partner at Last Mile Experts, specializing in CEP and e-commerce last-mile advisory.