Dale Boccabella
The government may cost consumers an extra 10% for their Christmas presents next year if they shop for them on the net overseas – but the overall benefit to Australia brick and mortar retailers is questionable.
Every day we open the papers to see the brick and mortar retailers are once again urging the government to lower the $1,000 threshold upon which GST can be charged to goods bought online from offshore retailers. The federal government has promised an announcement on this early in the new-year.
However I feel there are two big questions. Why would the Federal Treasurer support a lowering of the import threshold when just last year the Parcel Processing Task Force numbers indicated that it would be very costly to administer a lower threshold on imports, and indeed collecting, on some suggested thresholds, could cost so much it would largely outweigh the tax collected.
And, secondly why would the Federal Treasurer support a lower threshold unless he can somehow be assured that the State Governments will bear the political kickback that will necessarily flow from this? Last week, as they have been doing for some time, retailers pushed hard for GST to be levied on online purchases made overseas. However, this probably alienated their potential customers. Polling from Essential Research shows Australians are opposed to any lowering of the GST threshold for goods purchased online from overseas providers. Voters aged 35-54 are particularly hostile, with 57% opposing such a move.
While the government could argue that raising the threshold is an equity measure, even the consumer bible Choice has discredited some of the big retailers’ campaign, citing a measly 12% of Australian online shoppers buying from offshore retailers to save on duties and taxes. Instead most want and enjoy the increased choice of products, and want to buy products that simply aren’t available in Australia.
It is clear however that Australian retailers would love to see a tax on large overseas internet sales through a lowering of the $1,000 tax-free threshold. However, given the difficulties of collection, it is not clear that it will help raise much revenue; indeed the idea that it would ‘help fund roads and hospitals’ really seems to be a red herring: collecting the tax would cost so much that it would be completely out of proportion to tax collection costs of other taxes.
Consumers like being able to shop around for cheaper prices. However the new move as part of a promised GST review has raised retailer’s hopes again of imposing GST on what are called ‘low-value imports’.
In terms of a taxing point or collection point, this is also difficult. Australia could make every online retailer in the world register for Australian GST if they export Down Under. While technically feasible in today’s world of tax cooperation, this is unlikely and would simply be too complicated. Only requiring the big online suppliers to register and collect GST would create a bias and it would be unfair.
Much more likely, the obligation to collect and pay the tax would be collected in Australia, similar to what currently happens with items above the $1,000 threshold. This system is slow and labour intensive, especially for parcels coming into Australia through the international mail stream (as opposed to the express carriers). Quite frankly, consumers importing low value items will be annoyed with the extra delays and the extra costs that will inevitably be passed on to them.
It is far from clear what the Treasurer’s response will be early in the new year, but one likely response is that the government needs to do even more work on the issue.
Dale Boccabella is an Associate Professor of Taxation Law at the Australian School of Business.
Dale Boccabella, and colleague, Kathrin Bain, are presenting a paper on the low value threshold issue at the January 2014 conference of the Australasian Tax Teachers Association in Brisbane. The paper will explore the current state of play including developments in administering a lower threshold and the political ramifications of the various options.
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States are said to be urging the Commonwealth to charge importers an administration fee if the GST threshold is lowered. Let’s be fair. Overseas travellers entering Australia should be subject to the same regime if GST is tightened on imports coming through the postal system. Wait for the outrage from duty-free stores if that occurs!
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