27/01/2015 - 16:25

Invoice fraud sharpens GST reform case

27/01/2015 - 16:25

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Consumers and businesses are submitting fraudulent invoices to avoid tax and duties on purchases from overseas, contributing to calls from local retailers for reform to the tax-free threshold for imports.

Consumers and businesses are submitting fraudulent invoices to avoid tax and duties on purchases from overseas, contributing to calls from local retailers for reform to the tax-free threshold for imports.

Business News has received a document showing a business had been able to declare imports to customs at below sale price, allowing them to enter the country at an apparent value below the threshold.

Parcels below the $1,000 threshold do not have to pay tax or other duties.

One example included a $40,665 single purchase that was declared as two separate parcels of around $600 for passage through customs, thereby avoiding $4,100 in taxes.

A business would then collect and pay the GST on its sale, but would have been able to avoid charges for processing at the border.

Perth RC Models owner Brian Simpson, whose firm sells remote-controlled leisure equipment, said consumers could also use the loophole to avoid paying GST, customs duties and processing charges.

“(At one company) you can select the amount on your invoice,” he said, citing it as an example of a loophole affecting the sector.

Mr Simpson said he raised the issue with an overseas competitor, and they had failed to take any action to address the issue.

He said this invoicing method would enable consumers to avoid paying GST on goods sold for more than $1,000.

The potential for local retailers to lose business added weight to the case for tightening the threshold on GST-free imports, he said.

On the purchase of a $2,759 Apple MacBook, the amount of GST payable is normally $276, while nearly $550 of GST would ordinarily be levied on a $5,465 Canon digital camera.

Papers prepared by the Australian Customs and Border Protection Service for the Productivity Commission in 2011 said that the service had found a 2 per cent non-compliance rate with the threshold in sea and air cargo.

That compared with a rate of 9 per cent for high-risk targeted activity, it said.

International airmail non-compliance was 0.1 per cent, and 3 per cent for targeted high-risk activity.

A spokesperson for Customs and Border Protection said that, despite instances of non-compliance, there was no evidence of widespread undervaluation of goods to unfairly take advantage of the GST and customs duty concession.

The spokesperson added that penalties for non-compliance had been substantially increased recently, up to $42,500 for an individual and more than $200,000 for a body corporate.

The spokesperson said net revenue from compliance assurance activity in 2013-14 was $122.2 million.

It has previously been reported that customs estimated the cost of false declarations to be around $57.5 million in tax revenue annually.

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