Low Value Parcel Processing Taskforce

Recommendation 2.1

The Australian Government, through its membership of international organisations and agencies, such as the WCO and UPU, advocate for, and support, appropriate initiatives with respect to the provision and development of electronic data interchange in the international mail stream.

Recommendation 3.1

While recognising that, at this stage, data and systems limitations preclude the mandating of duty and/or GST collection from financial intermediaries, ongoing consideration should be given to initiatives of this nature that may facilitate the collection of duty and/or GST in the future.

Recommendation 3.2

That the option of deferral of payment of GST for all GST registrants, while not supported at this time, should be considered further going forward. The proposal requires further research on the administrative benefits for Customs and Border Protection relative to the compliance costs to businesses.

Recommendation 3.3

That given the complexity of duty arrangements, combined with the trend for duty rates to be lowered and/or abolished in the future, duty and GST low value thresholds be separated to facilitate a more efficient process for handling low value imports, including an option for revenue collection.

Recommendation 3.4

That to facilitate revenue collection, simplified GST assessment arrangements be applied to low value imported goods that would provide, inter alia:

1. for assessment based on value (not including transport and insurance costs). If this is not acceptable, then deemed amounts should be able to be applied (with capacity for importers to apply specific rates if desired); and
2. for processes that enable the use of a declared value of the goods in the first instance, subject to relevant compliance measures.

Recommendation 4.1

General

That reform to the handling and administration of low value goods, incorporating a new option to collect revenue, would best be achieved through the application of simplified GST assessment arrangements for low value imported goods between a separate low value GST threshold set above $0 and below $1,000. This would require modifications to existing processes, including:

1. reconfiguring the systems to enable data capture and the simplified assessment of GST through reporting and clearance processes in the cargo environment, pre-arrival data exchanged electronically by Australia Post and Customs and Border Protection and data manually captured by Australia Post in international mail gateways;
2. requiring Australia Post, express carriers and other freight forwarders to be responsible for collecting and remitting the revenue liability;
3. permitting clearance of goods from licensed depots or the international mail gateways – on an opt in basis – prior to revenue liabilities being met (subject to financial guarantees being in place from the relevant cargo or postal entities). Entities would be permitted to incorporate their collection costs into any direct or indirect charges imposed on importers; and
4. making ancillary changes to cater for increased numbers of business GST deferrals, more compliance activities and processing of claims with respect to GST exemptions. Modifications would be based on the functional elements set out in Figures 4.3.1 and 4.3.2, which detail the process changes for both the cargo and postal environments. Further details of business requirements are set out in Appendix D.

A Steering Committee consisting of senior representatives from Customs and Border Protection, the ATO, DAFF Biosecurity, CAPEC, Australia Post, and a representative from the States and Territories would be needed to oversee the development and implementation of these change processes.

International mail environment

To further enhance the handling and administration of low value goods, complementary reforms could be undertaken in the international mail environment to establish more consistent reporting and import clearance processes across import streams. This would primarily be achieved through the use of pre-arrival electronic data to streamline border agency processes to allow more targeted, risk based assessment over time.

Together with the modifications required for revenue collection, this approach would require:

1. a redesign of the physical layout of international mail gateways;
2. modifications of systems to capture and risk assess data provided by Australia Post in a manner consistent with current cargo reporting and clearance processes;
3. development of system interfaces with Australia Post; and
4. implementation of processes to manually capture value data to assess revenue liability for goods without electronic data (by Australia Post – possibly as delegate or agent of Customs and Border Protection).

A Steering Committee consisting of senior representatives from Customs and Border Protection, DAFF Biosecurity and Australia Post would be needed to oversee the development and implementation of these process modifications. The Steering Committee should be supported by select technical working groups responsible for providing detailed advice on the functional specifications and design parameters in the following areas:

1. ICT systems design; and
2. business process design, including the physical layout.

Given the nature and complexity of the task, and the timeframes available, the costing of the proposed approach aims to provide a 'rough order of magnitude' of anticipated benefits an
d costs across a range of alternative scenarios. While this can guide the direction of policy development, it is not a business case for the reform proposed. In recommending the proposed approach as the most feasible, it is recognised that detailed business cases need to be prepared and approved before funding is allocated.

Recommendation 4.2

In order to streamline revenue collection on low value imported goods, a centralised system for pre-registration for direct debit could be established over time. Brief details of business requirements for the registration of direct debit reform are in Appendix D. System development includes:

1. establishing an online registration web interface and software system;
2. integrating the system with the ICS and other Customs and Border Protection systems, as well as industry business systems; and
3. reconfiguring of the physical border facilities.

While this process change could facilitate a significant proportion of parcels moving quickly into the delivery stream depending on take up rates, its overall efficiency and cost effectiveness depends on the level at which a threshold is set.

Recommendation 4.3

To streamline revenue collection, legislative arrangements could be amended to enable and encourage appropriately regulated overseas suppliers to collect GST from purchasers of low value goods at the time of purchase.

Recommendation 4.4

Building on the culture of innovation and continuous improvement that exists between Customs and Border Protection, DAFF Biosecurity and industry participants in both the cargo and mail environments, in order to enhance the quality, efficiency and effectiveness of border clearance processes, the following actions could be taken to enhance existing processes, remove duplication and enable the measurement of resource utilisation and efficiency:

1. remove the role of Australia Post in opening mail items in secondary examination in the international mail gateways;
2. as pre-arrival data becomes available in the international mail environment, provide funding to support additional research into risk analysis and risk management, so border agency activities in the cargo and mail environments appropriately focus on risk-return outcomes; and
3. facilitate future investment and resource allocation through developing and implementing additional performance criteria measuring the ongoing productivity improvements achieved by Australia's border agencies. The performance criteria could include, but not be limited to, the time taken to undertake inspection and examinations, as well as cross-border agency and cross-gateway performance measures.

Recommendation 4.5

To streamline duty collection processes, and to facilitate future reform, Customs and Border Protection systems could be modified to provide a web interface to enable completion of FIDs in the international mail environment. The effectiveness of these changes should be reviewed after three years, and periodically thereafter, to determine if they can be used further for a greater volume of goods.

Recommendation 4.6

1. That border agency fees and charges should apply to goods valued below $1,000 to which GST is applied (if any).
2. That in setting the structure and level of border agency fees and charges for such low value goods, and to reduce cross-subsidies that currently exist, fees and charges applied or administered by Customs and Border Protection and DAFF Biosecurity be reviewed in accordance with Australian Government cost recovery guidelines. This will require Cost Recovery Impact Statements for import clearance processes for both Customs and Border Protection and DAFF Biosecurity, and potentially amendments to the Import Processing Charges Act 2001.

Recommendation 4.7

Consequent to DAFF Biosecurity fees and charges being applied to low value imported goods with a GST liability and recognising that any fees and charges placed on Australia Post need to have regard to its ability to recover costs, that DAFF Biosecurity's charge to Australia Post be held constant until a Cost Recovery Impact Statement is undertaken for the mail environment in accordance with the Australian Government cost recovery guidelines, and current funding arrangements are reviewed.

Recommendation 4.8

1. That Customs and Border Protection undertake periodic testing to assess changes in the levels of under-valuation occurring in relation to low value imported goods.
2. That a review of offence and penalty provisions in the Customs Act 1901 and the Taxation Administration Act 1953 be undertaken to ensure that they are appropriate having regard to the growth in low value imported goods and changed processes, including any separation in the thresholds for duty and GST.
3. In conjunction with the introduction of any new process that results in a greater number of goods being assessed for revenue purposes, additional funding be provided to Customs and Border Protection to enable it to undertake additional compliance and enforcement activities. The level of funding to be provided will depend on the volume of goods to be assessed for revenue.

Recommendation 4.9

That subject to appropriate privacy arrangements, access to additional pre-arrival postal and cargo data be used to facilitate enhanced ATO assessment of undeclared business activities.

Recommendation 4.10

That to better inform State and Territory policy and investment decisions which they may make as the entities responsible for GST administration costs, annual reporting of GST outcomes by Customs and Border Protection, via the ATO, to the States and Territories could be enhanced through additional reporting of:

1. item volumes, by value bandwidths (per $100) where possible, over three years (the current year and two previous years) and projected growth in items for the next year, in volumes and percentages;
2. item volumes, by value where possible, by percentage that have item level electronic pre-arrival data; and
3. any changes in policy and practice that expand the availability of pre-arrival data in the international mail stream.

Recommendation 4.11

That information gathered through sampling exercises, current and future clearance processes, together with any additional information made available through the capture and use of electronic data in the international mail stream for low value goods, be supplied to the ABS for use in the preparation of the Australian National Accounts and other publications.

Recommendation 5.1

That any implementation of reforms to the handling and administration of low value imports of goods, including an option for revenue collection, should ensure that:

1. reforms with respect to the application of GST on low value goods be undertaken in conjunction with reforms to border processes in the international mail environment to enhance risk based assessment using pre-arrival data;
2. reforms with respect to the application of GST occur in a staged manner having regard to the volumes of goods that need to be processed, the availability of data in the international mail stream and the costs associated with manual capture of data; and
3. as the direct beneficiaries of any increase in GST revenue and the entities responsible for funding GST administration costs, the States and Territories are consulted with respect to any proposed reforms to the application of GST on low value imported goods.

No Recommendation is made as to what threshold should apply with respect to a simplified GST assessment arrangement but it is recommended that due consideration be given to a staged introduction to ensure a smooth and efficient transition.