Several key figures in the IT distribution channel have raised concerns over a new method of tax evasion that is causing havoc with prices in the local market.
With the days of dodging the 22 per cent sales tax long gone, the introduction of the GST gave many in the IT industry hope that tax avoidance scams would be things of the past. But a lack of accountability at Australia's borders has brought about a new method of tax evasion that sources suggest is running rampant in the channel.
The scam basically involves the purchase of a large quantity of goods, often components such as hard drives or chips. The trader ships a quantity of these goods for export and gains a GST credit for 10 per cent of the goods. All is above board - if the said quantity of goods is actually what is shipped in the container.
ARN sources suggest several unscrupulous traders in the channel are only exporting a small percentage of what they claim in their shipping orders and taxation documents. For example, a company purchases one thousand units of a product from a vendor or authorised distributor, claims it is shipping those thousand units overseas, only puts one hundred units in the container if anything at all, and then claims the GST back on all one thousand units. The scam lowers the price of the goods it keeps on Australian soil (the vast majority of them) by quite a large degree. Their prices can become anywhere up to 10 to 20 per cent cheaper than their competitors.
The source that alerted ARN to the practice warned that without action on the part of the authorities, the scam was capable of "ruining the system".
Frank Sheu, managing director of distributor Synnex Australia, said his staff has seen the scam in action and noticed it was particularly prevalent in Sydney. He is calling for the Australian Taxation Office to take urgent action to even the playing field. "The majority of the goods stay here in Australia," he said. "It seems to be too easy to do."
A spokesman for the ATO said the office conducts regular risk assessments to determine the greatest risks to GST revenue. He confirmed that its compliance unit is investigating a number of cases in the computer industry at present. "At this stage, it is impossible to comment any further on the outcome of this work as it is ongoing," he said.
Victor Aghtan, managing director of distributor Westan, said he had heard of the practice and had noticed the effect on prices in the market. He said it was difficult for the authorities to check every container that leaves Australian shores, but without the appropriate checks and balances in place to uncover such practices, the effect on the market is "pretty severe".
"It makes a mockery of the system," he said.
Sheu said the ATO can track the practice through tax return statements months down the line, but by that stage they may not be able to track down the culprits. On most occasions the scam is undertaken by groups that set up and shut down within three to six months to slip through the system. "I'd like to see the ATO put a stop to these people," Sheu said.
Aghtan said he is confident the relevant authorities are looking out for large credit claims. "The problem is that once they've done the audit, the stuff has shipped and there is no proof."
The scams are not limited to exports. Some companies manage to lower prices by fudging the numbers on imports too.
The ATO requests that any information about such scams should be reported to the GST evasion helpline on 1800 060 062.