So last year I had unauthorised transactions on my bank account at which point my bank suggested to me whenever possible use a system like PayPal as then you don’t need to enter your CC details through online sites and risk them/someone scraping your CC details. Hence where I am now with this. I’m pretty sure PayPal’s location is not used as I have lots of other payments going through them without international transaction fees, so assume my bank is using the details supplied by PayPal to give Spotify’s location…
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I would like to add one thing to this conversation.
Not all transaction accounts/cards charge foreign transaction fees. If you’re not happy with what your current bank is offering, shop around. Calculate how much you’re likely to pay in these fees and see if there’s a better offer.
I have my transaction account with the WA based P&N Bank, which is member owned. I’ve not once been charged any fees despite regularly buying things from digital vendors based overseas.
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That cannot be reiterated enough, but if one is retired shopping around is rarely an option 
There are topics about the best foreign purchase credit cards as well as seniors getting credit cards.
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In theory this would be a great solution. But for whom. Likely the business providing the payment collection service. Possibly one or more of the big banks. A fee on a fee scenario. For something they are already party too!
Of corse the actual foreign transaction transfers don’t occur second by second, sale by sale. Visa etc save them up and process them merchant by merchant on what ever their terms are on a daily or weekly basis. One FEX transaction.
Aside from the lack of transparency to the consumer making the purchase (the original big issue), are the added consumer charges reasonable, or a rort?
That some bank products can deliver the same service fee free answers that question unreservedly!
Observation:
It’s a given some of us made our retirement decisions without the benefit of hindsight, If only we had predicted the current circumstances.
I guess some of us older ones could sweet talk one of the younger working family into creating another CC account with us oldies a secondary card hold and with access authority? Or have the banks closed that one off?
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The blurred lines…
- Should the merchant inform consumers they may incur foreign transaction fees due to them processing payments outside of Australia, but all depends on who you bank with, or
- Are banks with the fees treating customers unfairly as the 3% fee is unjustified, or
- Consumers should only pick accounts with no fees
But should I be more miffed that I was getting charged through Spotify Australia for months with no foreign transaction fees but only this month getting slugged 3% fee due to them processing from GBR. Or my bank has only just worked this out and been outside of Australia all the time…
Also for the oldies among us… UBank transaction account is still a good alternative that has less conditions for income compared with ING and has no foreign fees - https://www.ubank.com.au/banking-overview/transaction-accounts
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It does look good, excepting no credit card seems to be offered for those who prefer to have one with the same bank for whatever reason, so when overseas one has to juggle the available cash for debit transactions, although the sweep function is rare and a great feature that mitigates that annoyance.
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There’s the problem right there. Stop processing payments outside of Australia and the problem is solved. Conceptually there is no need to process the payment in any particular place. It’s all just data. It can be shuffled at the speed of light anywhere in the world.
(If processed in Australia, you can still get hit with the credit card surcharge however. You can’t expect to use a credit card and not pay for the costs of doing that.)
We need to understand: Why are companies processing payments outside of Australia? What is the incentive to do that? Has the government created that incentive, in part or in full?
However if payments are going to be processed outside of Australia then definitely the total actual cost must be disclosed up front. The government spent years getting on top of “drip pricing” but it seems as if this is one way in which it is creeping back, in a sense.
The image that you posted above suggests that this is false i.e. suggests that the payments used to be processed within Australia and then suddenly changed to being processed outside Australia.
Presumably that was by conscious choice, not by accident or stuff up. We don’t know whose choice (although obviously it wasn’t you).
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Incentive to process outside of Australia in a Tax Haven? Simple they avoid paying tax here beyond the buyer coughing up GST. If you purchase from a business in a tax haven they avoid producing profits here so no company tax is payable (or very little).
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Straying OT a bit. The global solution could be as simple as how online sales deal with local taxes. With bricks and mortar it is common for taxes and income to be assessed at the point of sale, at least before they play their accounting games to relocate profits as most corporate tax regimes allow, but simplistically if one personally buys in Australia there is GST, and in the EU there is VAT, and in the US there are state and local sales taxes. The income is attributed to the jurisdiction of sale, again before the accounting games begin.
Online sales increasingly support charging the customer the requisite sales taxes but ascribe the income to the point of sale, eg where it is processed, often a tax haven or low taxing jurisdiction such as Ireland.
How interesting it would be to legislate that online sale income (profits and tax) must be ascribed to the customers’ locations not the processing or fulfilment locations. The business communities and tax havens would spend the first hour gasping for air at the mere thought followed by a sharp pull back in the share markets, followed shortly by a very long parade of silks lodging suits.
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Finally got a written response from my bank regarding their thoughts on how/why I was suddenly charged from GBR when all previous had been from AUS. Note I haven’t changed my subscription at all since the change from AUS to GBR. Response is as follows:
Thank you for your email.
The Spotify charge has been made with Spotify Great Britain. As
this is from overseas, the 2.95% foreign transaction fee will be
charged. Unfortunately we cannot refund this.
To stop this in the future, you will need to sign-up with Spotify
Australia and cancel the existing subscription.
Thanks for banking with us and enjoy the rest of your day.
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Further response from Spotify:
Spotify is an international merchant, and while we only charge the rate stated on our website, other countries require a Foreign Transaction Fee for purchases made with overseas vendors. You’ve been billed in your local currency, but additional charges could apply depending on your payment method and bank. For this, we’d recommend reaching out to your card provider for more info /RZ
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One feels like they are on a carousel.
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What is paypal’s contribution to the circle ****?
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Paypal is saying the transaction happened in AUS and to contact the bank as they have it wrong… crikey I’m not sure I’m going to keep going with this over 53c. Although reoccuring monthly.
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Sure I understand all that. Since when though is GBR a tax haven? Channel Islands maybe? LOL.
Where the credit card transaction is processed isn’t the whole story about where the income / profit is booked.
I’m wondering whether there is more to it.
They’ve kind of already done that with the various multinational tax avoidance measures e.g. diverted profits tax. I’m sure it is an ongoing battle though.
It is never simple. Revenue (income) is one thing. Profit (and hence tax) is another.
A lot of these internet startups may have high revenue (after a time) but little to no profit, as they work on their monetisation models. (Spotify would appear to fall into that category.)
If you don’t have much global profit, you also can’t benefit much from shifting it around.
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May have made a breakthrough of some kind… Spotify again:
Hey there! We can see that we’ve never charged you in GBR before. Can you send us a screenshot of the charge in GBR as it appears on your statement? Just make sure to hide your full card and bank account details. We’ll take a look /NH
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Northern Ireland is counted here as GBR and they are a Tax haven of sorts.
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??? You want to get yourself killed? 
No, Ireland is IRL - meaning the Republic of Ireland, where a lot of the tax reduction stuff happens.
GBR is the United Kingdom of Great Britain and Northern Ireland.
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In 2015 Law was passed that allows Nthrn Ireland to charge a lesser rate of corporate tax than the rest of the UK to help counter the lower tax rate of the Republic of Ireland.
“in November 2015 the Northern Ireland Executive had publicly indicated its intention for the regime to begin in April 2018, with the rate of tax set at 12.5%”
https://www.rossmartin.co.uk/sme-tax-news/2309-northern-ireland-corporation-tax
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Fair enough. Still not Ireland. 
Does raise the question then as to whether the transaction is being processed in Northern Ireland or elsewhere in the UK. That’s simply not a question that we are going to be able to get answers to. Another reason why the government should enquire into this - as, either Ireland or Northern Ireland, it’s going to look like “diverted profits”.
Perhaps @mcbodee needs to be raising it with her/his local MP.
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