The issue of GST refunds is becoming increasingly thorny, as globalisation expands the reach of businesses to new markets, and supply chains become ever-more international. As companies trade in a greater number of countries they are encountering inconsistency in terms of time and compliance costs in obtaining refunds of the GST they incur.
KPMG’s inaugural GST/VAT refund survey, carried out over 65 nations, found:
- Only 40 percent of countries processed refunds efficiently for resident businesses, while 15 percent gave no refund or only gave refunds in exceptional circumstances
- Just 34 percent processed refunds efficiently for non-resident businesses, while 29 percent gave either no refunds to non-residents or only in very limited circumstances
- European countries were, overall, more efficient than Asian or Latin American markets
- There was a strong correlation between OECD membership and efficient handling of GST refunds
- In Asia-Pacific, many countries insist on carrying out tax audits of businesses registered if they apply for refunds, adding significantly to compliance costs
- Australia is relatively efficient in providing GST refunds, but this declines when non-resident businesses are involved
Dermot Gaffney, Head of Indirect Tax, KPMG Australia, said: ‘In an increasingly globalised world, the speed and ease with which businesses can get GST refunds can have a significant effect on costs, especially in the start-up phase. It can even make the difference between whether it is worth them trading in certain markets or not. It is a concern that markets in Asia and Asia-Pacific where much Australian cross-border trade is carried out, are lower down the efficiency tables in this area, and also that many countries carry out tax audits when such claims are made, which leads to delays and higher compliance costs and is a disincentive to doing business’.
He added: ‘But Australia too has work to do – there is a clear discrepancy between our treatment of domestic and overseas businesses, which does not help promote inward investment. Our efficiency lags behind countries like the UK, Germany and the Netherlands, so there is no room for complacency. GST refunds are becoming a critical financial, tax and business issue’ he said.