Visa has told the Productivity Commission in no uncertain terms that it cannot and will not enforce the collection of the goods and services tax (GST) on customers who purchase goods online from offshore sites for fear of legal and reputational ramifications.
In a letter addressed to the Productivity Commission, Adam Wand, Visa's head of Public Affairs, Australia, New Zealand and South Pacific, said that any plans to charge GST to customers at a card level presents a mammoth technical undertaking for the company.
Wand explained that when a Visa customer makes a purchase internationally, the payment is processed through the bank of the vendor receiving the payment (the acquiring bank). That bank sends a request for the purchase amount into the international processing system called VisaNet, which then approves the purchase. Wand said that the VisaNet system does not facilitate a detailed breakdown of a customer's purchase — an element crucial for applying GST to a purchased item.
"For example, a transaction between an Australian online shopper and an online trader based in Germany for $122.50 may be entered into VisaNet by a German acquiring bank.
"However, from this entry, it is not possible to extrapolate that the imposition of a 10 per cent GST levy would require the transaction to be increased by $12.25, as the original amount of $122.50 will have almost certainly have been made up of goods, some of which may have been and some of which may not have been subject to GST," Wand explained.
In order to collect GST payments, Visa would need to implement a complex data entry system for over 200 different jurisdictions, into which vendors would have to add the information necessary to collect GST on their sold items. Visa said that such a vendor-reliant system would not be accurate.
"It is almost certain that the GST amounts collected would frequently be incorrect. Equally, GST would likely be erroneously collected on a range of items that are considered GST exempt," Wand said in the letter.
"These errors would expose Visa to considerable and unacceptable legal and also reputational risk."
Overseas and online retailers who don't pay GST have drawn the ire of Australia's outspoken retailer community, including Gerry Harvey and Myer CEO Bernie Brookes. The Productivity Commission is examining the issue in its "Economic Structure and Performance Review".
Harvey set his online team a target of reaching $1 billion in revenue over the next decade, but stayed mum on how it would get there.