eBay's Australian tax headache

Last Tuesday I jumped in the back of a cab at the Australian Technology Park, bound for Sydney's CBD, after a colleage at the SMH offered me a seat. I cheerily introduced myself to the other passenger who was already in the back seat. "Oh, Mark Jones! We know you," she exclaimed. "I work at eBay." We all broke out in nervous laughter.

It turns out she was one of eBay's government lobbists, and this was the day I had broken my second story in as many weeks on eBay's status as a Switzerland-registered company that does not issue invoices to Australian merchants with GST included.   

I'm flattered The Australian followed my story today, quoting my sources, and I hear it's been picked up on radio. What's unfolding is a story about one of the great elephants in the room as far as multinational Internet companies are concerned -- if a transaction happens in cyberspace, which government collects the tax? eBay has operated at a loss for the past couple of years in Australia, as I first reported, because its offshore arm that managed the ebay.com.au domain directly collects the transaction revenues. If eBay thought this thing was going to blow over, it seems they were mistaken.

Update: I wrote a feature on "who pays tax in cyberspace" which was published in this weekend's AFR. Sorry that I can't point to it here cos our website doesn't permit such things. But to give you a flavour of the piece, it makes the point that 10 yrs ago the ATO issued reports dealing with the problems posed by e-commerce on the internet. A decade later, and we've still got apparently loopholes in Australia's tax legislation that let multinational Internet companies like eBay send revenues derived from Australian consumers straight offshore. One of eBay's defences, if you can call it that, is they are not the only company doing this.

Meanwhile, The Australian also ran a small piece this weekend pushing the fear and loathing angle around the fact that eBay has handed the ATO the full contact details of its large merchant sellers as part of an investigation into who is incorrectly claiming GST on eBay invoices. This is normal behaviour - they handed the ATO these details three years ago, and it states in eBay's user agreement that they will share those details with the ATO and the government. What doesn't seem to have been picked up in the reporting tho, is that eBay actually wants its merchants to be investigated because they have a bias in favour of the small "mum & dad" auctioneers. Recent fee hikes were designed to disadavantage the large merchant community, and make life better for smaller auctioneers and retailers. What's confusing to me is that at the same time, eBay has gone out and told the world they want to take on Australia's big offline retailers. How can you do that without big merchants in your eBay community?

Comments

[ben barren]

big story. so all of the ebays transaction or the largest seller's details are going to the tax office. i smell a rene rivkin 2.0 fire, but who will play the role of graham richardson ?

[Mark Jones]

Hey Ben. That's one side of the story, but it's not new. eBay has been "working with" the ATO and other organisations like the ACCC for some time now. What was new was my story about the fact ebay.com.au is operated by eBay International from Switzerland. That means they do not charge GST on invoices sent to merchants. And if merchants don't realise this (thousands don't) they risk getting caught for claiming GST credits from the government that were not theirs to claim. On the overseas front, the other story story I broke is that revenues from ebay.com.au are collected directly in Switzerland where the tax rate is approximately 10 per cent, some 20 points cheaper than Australia's corporate tax rate. Merchants are crying foul because eBay has a decent sized office down on York Street in Sydney. The official line from eBay is the local ops are only used for "marketing" purposes. Watch this space...

[Dave Evans]

Donna Kelly cant be too honest huh? Theres no such online store at ebay called Bonditopsellers. Clearly shes rorting the tax system.

[Marc L.]

Donna Kelly is as honest as they come, "Dave Evans" with the fake email address. You couldn't have tried very hard to find her store - all you had to do was type stores.ebay.com.au/bonditopsellers - too mentally challenging? Donna has one of the best business models I've seen on eBay, and there's no way she would put that at risk by doing anything dodgy with tax.

[Donna Kelly]

Please find the above link to my store

Kind Regards Donna