The High Court will rule today on whether Qantas can keep an extraordinary $34 million it has collected in goods and services tax from customers who didn’t show up in a landmark judgement that will help define the meaning of the word “supply”.The Tax Office says Qantas and its subsidiary Jetstar owe it $26.6 million in GST it collected on forfeited flights in the first eight years of the tax. It owes it a further $7.6 million in GST it collected on tickets for which customers never bothered to claim refunds.
Qantas says it can’t owe the money because it didn’t supply a flight, meaning it didn’t supply a service. The Tax Office says the fact that Qantas kept the fares and persuaded its customers it had done enough to keep the fares meant it did supply a service of some kind.
The Tax Office submission says the definitions of the words “supply” and “consideration” in the GST Act are deliberately broad - “as wide as language can make them”.
Qantas barrister Roderick Cordara told the High Court in June that “in the real world” when customers put down the phone after speaking to travel agents and are asked what happened they say something like: “I have just booked my flight to Melbourne”.
“They do not say: I have just made an agreement that Qantas will hold itself ready for a period, in case I turn up”.
But GST specialist Gina Lazanas from Balazs Lazanas & Welch says the Qantas position is complicated by its action in holding on to forfeited airfares as if it had fulfilled the terms of a contract.
Should Qantas win today - convincing the High Court it didn’t provide a service - she says it could face a class action from customers wanting their money back.
“It would be a windfall to Qantas - it would have collected goods and services tax but not passed it on on the ground that it did not supply a service,” she told the Herald.
“I could imagine a litigation funder getting involved"...
Hotels, tour operators and other businesses that sold and charged GST on non-refundable tickets would be watching with interest.
The government twice attempted to close what it fears might be loopholes regarding the payment of GST where the supply of services is in doubt, the most recent being draft legislation released in last week.
“A lot of people want clarity, I think Qantas might be doing this for clarity,” Ms Lazanas said.
The High Court last year dismissed an appeal by the maker of an Italian delicacy known as Mini Ciabatte on the basis that it was a “cracker” and subject to GST rather than “bread” which would have been exempt. At issue was whether the product contained yeast and was made with a lamination process.
Federal Court judge Richard Edmonds said the fact that such an issue ended up in the High Court made a mockery of the former Treasurer Peter Costello’s prophecy that the GST would simplify the Australian tax system.
“I am conscious that this conclusion is very much a function of the back down by the government of the day to provide an exemption for what was called “basic food”, he said. “However, it is illustrative of a complexity in the system of the GST, as distinct from the tax system itself, that provides fertile ground for uncertainty.”
Treasury calculations show extending to the GST to presently untaxed fresh food would raise an extra $6 billion per year. Budget papers show GST revenues failing to keep pace as spending on untaxed items including rent, education and health climbs faster than spending on items subject to the GST.
In today's Canberra Times and Sydney Morning Herald
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