The Vouchers Problem: An Insoluble Conflict or an Illustration of the Nature of Consideration in the 'Complex Parallel Universe' of GST?

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.

Keywords: Taxation, VAT, Value Added Tax, GST, Goods and Services Tax, Consideration, Vouchers

JEL Classifications: H29, K34

Accepted Paper Series