Oz Global GST Tax On It's Residents.

On 1 July 2000 Australia introduced a Goods and Services Tax (GST Act) on defined good and service acquired by the general public from Australian based businesses.

Since 2001 I have been purchasing American domain names and hosting my web sites from a server based in America. I paid no GST on these products because:

On 1 July 2017 the Australian government amended the GST Act to make provisions that all business, irrespective of where in the globe they are located, collect GST tax on a transaction for anything (incl purchase of goods or the delivery of a service) with anyone located in Australia and to remit that tax to the Australian Taxation Office (ATO).

In September 2017 when purchasing an American product, a 'Domain', that business charged me GST.

I wrote to the business and ask them for an explanation as to why all of a sudden after 16 years they were charging tax on the purchase of their product and enquired as to whether or not their state or national government had introduced a goods and services tax on business transactions in America?

The business responded advising me that the business "is simply responding to government action in the region in which your account is billed" and that "All products sold by GoDaddy are considered subject to VAT/GST."and "Any taxes collected by GoDaddy are remitted to the appropriate authorities in Australia".

As an aside, it was interesting that they didn't actually seem to know which authority in Australia they were required to remit the GST to?

I responded to their advice questioning whether or not they had referred this matter to their lawyers for advise as to if Australian law had authority over a business based in America, providing an American product which remained in America after purchase and a service that was delivered solely from within America

I never received a response to this email.

Faced with this situation I wrote to the ATO.

First I explained that since 1998 I have been developing my own websites as a hobby and it is my practice to rent American domains (.com; .org; .net) (as these domains are Top Level Domains [TLD] and considered to have the most utilitarian application around the world) from an American registration company which is located in Arizona in the United States.

I went on to further explain that once rented these American Registered domains (my intellectual property) are held within a registry in America and I utilise their web hosting facility, also located on their server in Arizona.

I then asked three questions:-

  1. Can you please send me the relevant section of the legislation that gives the Australian government the authority to require a company providing a service in another country (i.e. American company based in Arizona) to collect tax on behalf of the Australian government for the rent of cyber space located in that country (USA).

ATO provided a reference to the relevant section of legislation and the ATO ruling on this matter.

In essence, with miniscule exception, Australian tax (GST) is payable on anything (Goods or Services) if:

Examples:

Of course a consumer is not legally responsible to pay GST to the ATO, business is, - to charge, collect and remit that GST.

  1. Can you please tell me the policy of the Australian Taxation Office in the enforcement of this legislation? 

    The reason I asked this is that at present there are 193 sovereign governments registered with United Nations some of those sovereign governments (i.e. China) also run businesses for the renting of their national domains PLUS also the 2965 ICCAN approved registrants’ authorities world-wide. 

ATO provided a response but did not address the question asked. The response was of no benefit as it focused solely on policy matters and did not address how the ATO was going to administer and enforce the legislation throughout the planet?

  1. How will the ATO enforce compliance with this law on service providers throughout the planet?

ATO provided a response referring me to their web site.

The article refers only to the application of the new GST law to "Imported Services and Digital Products". and nothing else caught by the new laws. In any event however it did not even in reference to Imported Services and Digital Products outline:-

and

So I decided to clarify some of the content provided and responded on 7 November 2017 seeking and explanation as to: ,

At the same time I lodged a request on line to the Secretary of State of the United State of America asking if the Australian Taxation Office could enter premises in the USA for the purpose of conducting a 'Compliance Audit'; for any business to check to ensure that business was complying with Australian Law.

No response was forthcoming.

But when a new SoS was appointed I again lodged the same request on line to the new Secretary of State asking the same question.

No response was forthcoming.

I also emailed the Vietnamese government (twice) asking the same question as I though this would be a good test of the authority of this Australian Tax law as Vietnam was the last country that I can recall that we declared war on (Or did we? - Surely we didn't just charge over there and start shooting then dead without a formal process!) and if they recognize the power of Australian sovereign law in Vietnam then I guess it MUST be good for the rest of the world.

No response was forthcoming.

I then emailed the Federal Attorney General (FAG) asking for advice about enforcement of Australian law world wide giving a few example of countries and domain address of website that could make commercial supply of good and services in terms of the ‘A New Tax System (Goods and Services Tax) Act 1999

No response was forthcoming.

But when a new FAG was appointed I again emailed the new FAG asking the same question.

This time I got a response which was wasn't helpful.

So I responded seeking to have my question, which was given that Australia has promulgated a law requiring compliance by entities located outside Australia and from a practical position of Administration of that law would requires a Commonwealth Department to compel, interrogate and if necessary seize material from and even attempt prosecution, of entities located outside Australia, for the purposes of administrating/determining compliance with Australian territorial law, an explanation of-

addressed.

No response was forthcoming.

On 18 February 2019 I made an enquiry of the Attorney General of the United Kingdom Government seeing, as they were the government that with the Queen (Victoria-pre 1901) or perhaps the King (Edward VII) had approved the Australian Constitution as to what was your/thier intention/objective at that time was in this regards and it was intended that the Australian Government be empower, by this documwent to, any time in the future, make laws to bind 'commercial activities' world wide -(including within the United Kingdom)?

No response so far, has been forthcoming.

Examples of application of the law

You are going to German for a holiday and you book a haircut online to have while in Germany. Under the current GST law the booking agent would on the surface, be required to charge you GST, as at the time of making the purchase you had an online Australian Residential Address.

However according to ATO '...an Australian resident receiving a haircut from a hairdresser in Germany is not required to pay GST for this service'’.

It appears that it would depend on how and when the service was paid for!

Now tell me, that this whole thing has not got right out of hand!

Constitution validity

Section 5 of the Australian Constitution states:

This Act, and all laws made by the Parliament of the Commonwealth under the Constitution, shall be binding on (only?) the courts, judges, and people of every State and of every part of the Commonwealth, notwithstanding anything in the laws of any State;

The term “State” and “Commonwealth” are  not defined in the Act but I understand this to refer the ‘States’ of the Commonwealth of Australia

If I am correct, then the law making power of the Australian parliament, under the Constitution, is limited in application to entities ENTIRELY and ONLY WITHIN the Territorial area of the Commonwealth of Australia.

Therefore business and people not within that territorial area, cannot lawful be made to collect tax on behalf of the Australian Government.

Consequences

According to Prime Minister, Scott Morrison, this NEWGST change “so far” has netted the Australian Government $600 million. Though he did not say over what period?

Given that this is GST, then by its design it’s burden falls exclusively on individual Australians.

What nobody know or can know, including Scott Morrison, is the following:

This is what I believe is close to the truth:

I also believe that the big commercial Internet companies that would constitute the bulk of the commercial transaction with Australians for the delivery of their products and services have offered the Australian government no resistance by way of testing this laws validity because the taxation (NEWGST) is paid from the client's pocket, not from profits of the organisation as a business tax would be.

I am further of the opinion that the cooperation of these companies has been acquired by brokering a compromise on the quest to pursue corporate tax by abandoning the problematic and complicated process of International business taxation law and instead substituting or supplementing this income to the Australian government through the collection of additional taxation from Australian residents

Perhaps the most distressing aspect of this whole matter is that the Australian government has, for the first time that I am aware of, moves beyond the Constitutional power of Parliament to implement an agenda for the purposes of promoting political objectives. [Tax Reform]

The Federal government that introduced this legislation is also the government that introduced legislation to reduce taxation for a wide range of Australian businesses. The adoption of the NEWGST strategy is a mechanism that can help to balance the budget by shifting income tax receipts from the business sector across to the largely powerless individuals of the community.

For business this is a net benefit.

For those individuals that are the recipient of Income Tax Cuts, it is simply a matter of giving with the left hand and taking with the right,

For those who were not the beneficiaries of any tax cuts but undertake commercial transactions with organisations outside Australia for products and services that are not delivered within Australia, this is a further deficit on their personal budget.

AND most importantly, what does it have to say about the ethical standards of our government and our future if they have abandoned legal principals in favour of political ambitions and agendas.

Warren Bolton

20 February 2019