With Internet commerce escaping tariffs and duties, the online method of trading is taxing the minds at the Australian Tax Office E-commerce has some Australian companies deeply worried. Since foreign companies supplying goods electronically pay no Australian company tax, payroll tax, fringe benefits tax, state taxes or council levies, some traditional traders see themselves at an immediate competitive disadvantage to Web-based traders. Others who've already ventured into Web-based trading are more worried about the danger that overly restrictive tax legislation might inhibit their competitiveness in the online economy.
These are just some of the issues being considered by a team of ATO tax and computer specialists as they struggle to clarify taxation laws relating to business on the Internet. Governments all around the world know they face enormous problems in tracking elec-tronic transactions through the Internet, and the ATO is consulting with numbers of international tax forums, especially the OECD, as it tries to resolve the issues.
In its initial report, Tax and The Internet, the Tax Office found e-commerce could already be posing as much as $10 million "risk to revenue" per year. In the meantime, the dilemma - and the Tax Office well knows it - is that any attempts to change the tax laws to help recoup potential lost income might put serious brakes on Australia's fledgling e-commerce industries, and give our competitors overseas an unbeatable advantage. This in turn could reduce company profits and therefore tax revenue.
Sensibly, the minister in charge of the National Office for the Information Economy, Richard Alston, has promised goods ordered and delivered electronically will remain duty free.
And he has pledged that there will be no tax on "bits" - that is on the amount of information transmitted across the Internet. If the Government stays true to the pledge, the stance is to be welcomed. If, on the other hand, the words have as much credibility as the Coalition's non-core election promises, the e-commerce industries in Australia could be in serious trouble.
ACS president Prins Ralston says while the statement complies with ACS suggestions that government state a policy on taxation and electronic commerce that would give some certainty to e-commerce traders, he's concerned about the caveats Alston included in the statement.
Ralston warns the statement left the definition of an e-commerce transaction wide open, and failed to rule out new taxes on fees paid to information service providers, which he said would provide a disincentive for companies to set up in Australia.
"The other issue is how much money should be spent on actually regulating and chasing these transactions around," he said, warning such measures could end up costing more than they earn.
Sue Bushell is a Canberra-based political correspondent