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Tasmania

TREASURER

259462

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Hon P Dutton, MP
Minister for Revenue and Assistant Treasurer
Parliament House

CANBERRA   ACT   2600

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2 0 t.'?P. 2007 .

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PROPOSED AMENDMENTS TO EXPAND T ARRANGEMENTS FOR TOURIST SHOPPING

Thank you for your letter of 4 January 2007 regarding proposed changes to the administrative arrangements governing the Tourist Refund Sche.(TRS).	I appreciate the opportunity to comment on this proposal.  ASi:here are three measures being put forward, I will address each · of them separately.

Aggregation of multiple invoices
The Australian Government has proposed  an amendment to the TRS rules that will allow
·, 	international  visitors to Australia (and Australians travelling abroad) to aggregate multiple invoices from the same  retailer. in order to meet the minimum spend  of $300 required to claim a refund of the Goods and Service Tax (GST) and any Wine Equalisation Tax (WET) levied on those invoices. Just as ensuring that taxpayers meet their obligations is an important part of tax administration, ensuring that the tax system honours the entitlements of taxpayers is a fundamental principle that informs taxation policy. I agree that the current rules are likely to result  in otherwise  valid claims  being rejected.    Consequently, Tasmania  approves  the proposal to allow the aggregation of multiple invoices for the purposes of the TRS.

Extension of timeframe for exporting goods
The Australian Government has proposed that the time in which goods must be exported in order to qualify for refunds under the TRS be extended from 30 days to 60 days. In addition, it is proposed that the timeframe for the use of the customs "sealed  bag" system  (used to prevent  consumption  of  goods  by  travellers  prior  to  departure  from  Australia)  also  be extended to 60 days to be consistent  with the TRS.   Again, the possibility that the current arrangements  may  result  in  otherwise  legitimate  claims  for  a  refund  being  rejected  is inconsistent with the rationale behind the TRS.  I note that the extended timeframes reflect the general export provision in the A New Tax System (Goods and Services Tax) Act 1999.  On this basis, Tasmania approves the proposed extension of the timeframe for exporting goods.

Outsourcing of TRS processing
The TRS is currently provided by the Australian Customs Service (ACS).   A private sector firm, Fintrax  Payment  Services (Australia)  Pty  Ltd, provides  TRS  processing  services  to ACS, having  competed  in an open tender process to do so.   However, it is the ACS that

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·	Telephone: (03) 6233 2229  Facsimile: (03) 6233 6114
Email: trcasurer@treasury.llis.gov.au Internet· http://www.treasury.tas.gov.au

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provides the interface between international travellers and the TRS, and the ACS that is responsible for both export verification and the integrity of the IRS.
The Australian  Government  has proposed that the provision  of refunds  tmder the IRS be opened up to the private sector, via an open tender process.   In support of the proposal, the Australian Government has claimed that spending in Australia by international travellers will increase, and the take-up rate for TRS refunds will almost double.  The estimated cost to GST revenue of this measure is in the region of $50 million per annum, of which approximately
$2 million would be revenue surrendered by Tasmania.

In principle, I have no issue with a measure that increases the take-up of IRS refunds.  As I have stated previously, it is important that taxpayers are able access their entitlements and that taxation administration arrangements make it as easy for them to do so as possible.  However, I am not convinced by the arguments put forward in support of the proposed changes to the delivery  of  TRS  refunds, nor am  I convinced  of  the economic  benefits  that  will flow  to
·- ··-·· xustl'aiia in a general sense, and Tasmania in particular.  - ·  - ·····-- ------ ··-------  ·- ---·- ·- ·-···------·

Tourism is an important part of the Tasmanian economy, and recent years have seen growth in the number of international travellers visiting the State.  It is my view, however, that if the outsourcing of TRS refunds does encourage greater expenditure by international travellers in Australia at all, the beneficiaries are likely to be retailers in a number of interstate capitals, particularly Melbourne, Sydney and Brisbane.  Regional destinations will receive little or no economic benefit and, depending on the as yet undetermined licensing conditions imposed on TRS refund providers, it may even be possible for retailers in Tasmania, particularly smaller retailers such as Tasmania's boutique winemakers, to be disadvantaged.

In terms of air travel, there are currently no scheduled international flights into or out of Tasmania, meaning that international visitors to the State are tmlikely to have access to refund providers until they reach the city or airport from where they will leave Australia.  Therefore, it is difficult to see how the outsourcing of TRS refunds will generate any additional turnover for retailers in Tasmania.

In terms of sea travel, the  number of cruise ships visiting Tasmania, many of which carry international  visitors, has been growing steadily, as the State's reputation as cruise destination grows.   While the volume of tourists that visit the State aboard cruises is significant for Tasmania, it  represents a relatively  small proportion  of international  visitors  to  Australia.
Given  .that ·not  every  ship  visiting· Tasmania  departs  for  an  international  destination,  it concerns me that the potential volume of TRS refunds in Tasmania may not be sufficient to
induce a private sector refund provider to establish operations in Tasmania.  This would mean that international visitors aboard cruise ships would no longer be able to access the IRS while still in Tasmania.   Accordingly, any additional expenditure  in Tasmania  generated through TRS refunds would be lost.

The proposed outsourcing of refunds also appears to introduce an additional step in the.TRS process, in that it will require international travellers to deal with both the ACS and a refund provider,  rather  than  just  the  ACS  as  is currently  the  case.    I do  not  believe  that  such arrangements represent an improvement in terms of their efficiency or transparency, and the fact that travellers will receive something less than their full entitlement to a refund is not an outcome to recommend the proposed arrangements either.

I accept the principle that the Goods and ServicesTax (GST) is intended to tax consumption in Australia only.  However, I do not see that the proposed TRS outsourcing arrangements are

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