Gaping holes in the Federal Government's sales tax laws remain unplugged and some operators in the IT channel are still trading illegally despite the ATO's best efforts to end the tax rort. Meanwhile, many Australian channel organisations are still reporting frustration and hold-ups with the accreditation and authorisation procedures, according to sources contacted by ARN.
Leon Howe, managing director of printer vendor and distributor Star Micronics, said that even if all the bugs in the accreditation and authorisation procedure are ironed out, the basis for avoiding sales tax is now found at the point of importation.
Howe explained that the gaping hole in sales tax collection occurs when an undervalued container of impor-ted goods arrives into the country. He illustrated the problem with a hypothetical example.
"If a container arrives from Hong Kong or Taipei with documentation that shows its value as $100,000 worth of IT equipment, and an uplift fee of 20 per cent makes its value $120,000, sales tax payable on this container of goods is $24,600.
"Those goods are deemed to have had sales tax paid. They could be resold from that point with no further consideration to the calculation of sales tax - it's already been paid. But in reality, the goods in the container were worth about $500,000 and the customs authorities had no means of establishing the value other than by the shipping documentation," Howe said.
In the example, the impor-ter has apparently negotiated a very good buy, but in fact, may have also paid a "management fee" to the consignor of the goods.
The net result is that sales tax is paid on approximately one fifth of the landed value of the goods, and thence no one else in the chain even knows how much sales tax was paid.
Howe suggested that the only way to eliminate the tax rort is by the introduction of the GST.
"If sales tax is eliminated and a GST introduced, the tax is paid - and itemised - at the point of sale. So when $500,000 worth of IT goods is imported and sold, regardless of what the importer claims it cost, tax is paid according to its sale value. Legitimate operators are no longer subsidising the cheats," he added.
Howe, whose business interests include New Zealand, said that he was originally opposed to the introduction of the GST there, but now believes it to be the only way to eliminate tax cheats in the Australian channel.
So while vendors, distributors and resellers are coming to terms with the new sales tax exemption procedures, there's a gaping hole for tax avoiders to sail through, and the IT tax avoidance industry flourishes.
Meanwhile, Maree Lowe, director of assembler and distributor Anabelle Bits, reported that the Australian Tax Office's accreditation procedure had struck some bottlenecks, and that at one stage, for two days, the company could not get through to the tax office hotline for authorisation of a reseller's tax exemption.
"This has since improved but there are a lot of our channel customers now waiting for accreditation," she said.