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. Prices can therefore become anywhere up to 20 per cent cheaper than those of competitors.
A spokesman for the Australian Taxation Office said that regular risk assessments to determine the greatest risks to GST revenue are regularly conducted. 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.
The source that first alerted ARN to the practice warned that without action on the part of the authorities, the scam was capable of "ruining the system".
For ARN's full investigation read this week's issue (May 29), out now.