Postcard from Import tax

Here in Australia we have a government that's short of money. Not that this is somehow different, most countries have a similar problem.

Malcolm Turnbull's government has come up with a way of increasing tax revenue, and it sounds promising. They intend to ask foreign companies to collect a ten percent import tax and forward it to the ATO. I can see several possible scenarios unfolding here.

First, the company just says "no". After all, why should they do the Australian government's work for them? There's not much incentive. It's going to increase prices and increase their workload, for no benefit. And, there's no possible enforcement or penalty unless a trade agreement is signed specifically covering this.

A second alternative is that they say no, but increase their prices anyway, claiming it's to cover an Australian import tax, and use the money to increase their profit. Again, policing this behaviour is going to be impossible, it's a foreign country with their own legal framework. Even if there were a trade agreement, stopping this could be difficult.

A third would be to say yes, collect the ten percent, but deduct the accountancy fees incurred before forwarding the balance.

A fourth option would be to charge Australian buyers ten percent and forward the whole amount to the ATO. Of all the options available, this one makes the least sense. Administering the tax would cost the company, but the cost would be absorbed.

Three options increase the cost for Australian purchasers and only two provide extra tax. I suspect, if the idea goes ahead we'll see a mix of the first three options from different companies.

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