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Abstract: This article examines the principles underlying the Australian GST treatment of cross-border supplies of "things other than goods or real property" (referred to in other jurisdictions as "services"). Using a framework based on recent preliminary work by the OECD on consumption tax conflicts for cross-border supplies of services and intangibles, the article highlights the practices and problems that arise in all jurisdictions, and the main areas of conflict. The article then considers the key interpretive approaches evident in the Australian Commissioner of Taxation's rulings on the GST law and critically examines these approaches by reference to the international practices and principles. The paper concludes that the interpretations are not out of line with international practice, and have a firm basis in principle. However, there are clearly problems in the way Australia has drafted its jurisdictional rules, in particular its over-inclusive approach to non-resident suppliers, which deserve rethinking.
Goods and services tax, value added tax, consumption tax, destination principle
Abstract: Inconsistencies in the design of cross-border jurisdictional rules in different VAT models have come under increasing scrutiny in recent years. The rules for services have attracted particular attention because of the rapid growth in the volumes of cross-border services transactions. Just as competing jurisdictional principles make it difficult for businesses to understand their obligations, revenue administrators also face significant obstacles to collecting VAT on cross-border services. This paper outlines the legal design principles underlying the two main models of VAT, The European VAT Directive and the New Zealand GST, notes some of the variations on those models, and explains how and why cross-border conflicts can arise. A simple example illustrates the complexities that can arise even when applying what appear to be commonly agreed VAT rules to what should be a comparatively simple transaction: the supply of real estate agent's services in relation to a sale of land.
VAT, GST, tax, consumption tax, value added tax, goods and services tax, cross-border conflicts, destination principle, jurisdiction, place of supply, place of taxation, exported services
Abstract: This article critically examines judicial decisions of the European Court of Justice and the United Kingdom courts on the VAT treatment of transactions involving non-monetary consideration, focussing on transactions where one of the parties is an end consumer or a non VAT-registered supplier. A number of separate but converging lines of case law are considered, in particular the direct selling cases, which deal with supplies of services as non-monetary consideration, and the trade-in cases, which deal with supplies of goods for which an exchange or trade-in is provided as part payment. The author questions how the reasoning in the earlier cases could have culminated in the decisions of the UK Court of Appeal in Customs & Excise Commissioners v Littlewoods Organisation plc; Lex Services plc v Customs & Excise Commissioners; Customs & Excise Commissioners v Bugeja; Kuwait Petroleum (GB) Ltd v Customs & Excise Commissioners. The perspective is comparative, and considers how the cases might assist the appropriate interpretation of Australia's GST. Originally published in the British Tax Review in 2003, the article was referred to by the House of Lords in the appeal in Lex Services, as was an article on the same topic by Professor Geoffrey Morse from the previous issue of BTR. To the consternation of both authors, their Lordships confirmed the lower Court decision, despite its apparent inconsistency with the principal of fiscal neutrality.
VAT, GST, non-monetary consideration, consumption tax, trade-in, direct selling, ECJ, Lex Services
Abstract: This paper examines the jurisdictional reach of VATs, as determined through their rules on place of taxation. After opening with an examination of the destination and origin principles, it looks at the way in which VATs predict consumption at the time of supply by using proxies to determine the place of consumption. The paper then examines the structure and legal design of place of taxation rules, comparing and contrasting the way these are dealt with in the two main models of a value added tax: the European VAT and the New Zealand GST. The paper considers imports of goods, supplies of goods, supplies of services, and different approaches to using the reverse charge mechanism for imported services. The second half of the paper then examine the way in which (mainly English speaking) African nations have adopted and/or adapted one or other of the two main models, and considers how the laws of those countries measure up to the ideal of taxing domestic consumption under the destination principle. The paper was originally presented in June 2007 at the "VAT in Africa" conference sponsored and hosted by the African Tax Institute (University of Pretoria) and recently appeared in the book of the same name, published by University of Pretoria Press.
VAT, GST, tax, consumption tax, value added tax, goods and services tax, cross-border conflicts, destination principle, jurisdiction, place of supply, place of taxation
Abstract: This paper examines the Australian GST treatment of vouchers, focussing on the difficulties that arise in trying to determine the taxable value of supplies made when vouchers are redeemed. The paper proposes a set of basic GST principles, discusses the way in which Australian GST attempts to embody those principles, and then evaluates the treatment of vouchers by reference to those principles. In the process, it critically examines the Commissioner's draft views on the treatment of vouchers and proposes an alternative interpretation. Having done so, the paper evaluates both interpretations by reference to one simple and four more complicated voucher transactions, including the supply and redemption of telephone cards, "free" vouchers, retail loyalty scheme vouchers, and vouchers accepted by a supplier other than the one that issued them. Each scenario has parallels in case law in other jurisdictions. Having concluded that there are insoluble difficulties with the current Australian treatment of voucher transactions, the paper calls for legislative amendment of the GST Act to achieve a more appropriate treatment.
Taxation, VAT, Value Added Tax, GST, Goods and Services Tax, Consideration, Vouchers
Abstract: This paper builds on an analysis of VAT jurisdiction rules in Sydney Law School Research Paper No. 09/44, to consider intentional and unintentional double non-taxation issues in the context of VAT. Since a VAT is an indirect consumption tax, imposed on suppliers but intended to burden the consumption of customers, the concept of non-taxation in VAT is inherently an economic concept, relevant primarily to business-to-consumer transactions. The paper outlines some of the examples of intentional and unintentional non-taxation or partial taxation that are common to most VATs. International passenger transport and international tourism are identified as the two main areas of intentional non-taxation or partial non-taxation in VAT. Sources of unintentional non-taxation, which are primarily analogous to source-conflicts in income tax, include the use conflicting proxies to determine the place of taxation for a particular supply, conflicting interpretations of same proxy, and the determination of tax status at different times. Furthermore, because exemption without credit is a means for intentionally imposing partial taxation, failure to impose an input tax burden on an exempt business is a form of non-taxation. The paper argues that the current interest in developing an international consensus on cross-border VAT rules should not be limited to double taxation issues and should include a focus on the prevention of non-taxation. Finally, the paper argues that there is a place for rules that tax 'exported' services in order to prevent the non-taxation of the domestic consumption of those services.
VAT, GST, tax, consumption tax, value added tax, goods and services tax, cross-border transactions, destination principle, origin principle, source, residence, jurisdiction, place of supply, place of taxation, double taxation, non-taxation
Abstract: This paper focuses on the principles underlying the jurisdiction to impose value-added-type consumption taxes (VATs). It analyses existing VAT models to identify the concept of consumption on which they are based and to determine whether there is a common language in which questions of non-taxation (and taxation) can be discussed, looking in particular for echoes of the income tax source-residence dichotomy. A subsequent paper (Sydney Law School Research Paper No. 09/45) uses the framework proposed in this paper to analyse intentional and unintentional double non-taxation issues in the context of VAT. The paper suggests that the usual analogy drawn between the residence and source concepts for income tax and the destination and origin principles for VAT is of little practical significance. A more useful analogy is found in the distinction between tangible and intangible supplies, which underlies the way in which VAT laws predict the place of consumption. When examined in detail, it appears that VAT laws do have an underlying concept of place of consumption, which differs for different types of supply. The VAT concept of consumption cuts across the source and residence concepts in a number of ways, with the effect that VAT is applied sometimes at the source of the supply (which includes the residence of the supplier), sometimes at the residence of the consumer, and sometimes at a place of consumption that is neither source nor residence.
Abstract: It has been said that Australian GST has no time of supply rules, but this view stems from a misunderstanding of the role of time of supply rules in other jurisdictions. A comparative approach reveals that such rules are simply attribution rules, responsible for allocating the payment of tax to particular tax periods, and Australia does have such attribution rules. Moreover, other jurisdictions frequently determine the status of a supply by reference to the real time of supply in the real world. Identifying the time at which a supply is made is of fundamental importance for a tax on transactions because the tax treatment of a transaction is determined at that time by reference to a range of features, which may include the character of the supply, the status of the supplier, the location and status of the recipient, and/or the location of goods. Two areas where the interaction between attribution time of supply rules and the real time of supply is significant are the treatment of transactions which span the entry into or exit from a GST group, and the treatment of cancelled transactions. Recent United Kingdom case law on VAT avoidance schemes provides a good illustration of the former, while recent New Zealand case law on land transactions deals with the latter. These cases reveal that Australia is not alone in its lack of legislative guidance on the real time of supply. The article concludes with some suggestions for real time of supply rules for Australian GST.
Tax, GST, VAT, value added tax, consumption tax, goods and services tax, time of supply
Abstract: This paper critically evaluates the legal design of Australia’s GST (a value added tax) in light of recent OECD work on the consumption tax treatment of cross-border transactions. An emerging consensus from the OECD suggests that, for business to business supplies, consumption taxes should use a ‘Main Rule’ that imposes tax at the location of the customer. A strong preference for collecting the tax from the customer using the reverse charge mechanism is also expressed. A careful consideration of Australia’s place of taxation rules for ‘inbound’, ‘outbound’, ‘wholly domestic’, and ‘wholly foreign’ transactions, and their interaction with the rules on input tax credit entitlements, reveals that Australia does indeed use such a Main Rule. Following a hybrid approach between the European VAT model (for goods) and the New Zealand GST model (for services), the Australian GST is more strongly destination-based than both the European VAT and the New Zealand GST, with which it is compared. However, in eschewing a widespread use of the reverse charge mechanism and requiring the registration of non-residents, the law is clearly overly-inclusive of non-resident suppliers, without necessarily more effectively taxing consumption by domestic consumers, which is the ultimate objective of the tax. The paper therefore ends with suggestions for reform.
VAT, GST, value added tax, goods and services tax, consumption tax, place of supply, place of taxation, zero-rating, GST-free, cross-border transactions, OECD, Australia
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