Sean Nicholls
September 7, 2012
Sydney Morning Herald
THE NSW Treasurer, Mike Baird, is proposing a dramatic lowering of the GST-free threshold for goods bought online from overseas retailers in a move that would raise hundreds of millions of dollars in extra tax.
Mr Baird wants the Commonwealth to look at cutting the threshold from $1000 to about $30 to capture millions more transactions in the GST net and bring Australia into line with countries such as Britain.
The move, which was a recommendation of the Productivity Commission report into retailing last year, would add 10 per cent to most international online purchases.
But the trade-off is that it could help pave the way for the abolition of stamp duty on housing and other taxes by replacing the revenue that would otherwise be lost by the states.
The Productivity Commission raised concerns that lowering the threshold would not be cost effective because the expense of having Customs police a lower threshold would outweigh the tax benefit. But Mr Baird said predictions of a surge in online retailing in the next few years meant the point at which revenue would exceed costs was likely to be close.
”It’s clear that the GST base is growing less than anticipated and the government needs to look at all options to replace revenue that is essential to deliver services and the building of infrastructure,” he said.
”It’s time that we seriously consider online retailing because it is growing exponentially and means that our domestic retailers aren’t competing on a level playing field.”
The commission report estimated that about 2 per cent of all retail sales, worth about $4.2 billion, were from overseas online retailers. About 77 per cent of those were worth less than $100.
The report quoted market analysts who predicted online retailing would grow by between 10 and 15 per cent a year.
The NSW budget papers estimate the stamp duty revenue from housing at $4.5 billion this financial year, rising to $5.8 billion in 2015-16.
Mr Baird said there was ”more work to do” to determine potential administration costs and the exact amount of revenue that might be raised by the change. But he would be putting it to state treasurers to consider as part of the state tax reform process,” he told the Herald.
In Britain, value added tax is payable on most online purchases worth more than £18 ($28). In Canada the threshold is $C20 ($19) and in the US it is $US200 ($187).
Mr Baird and the South Australian Treasurer, Jack Snelling, were asked by the federal Treasurer, Wayne Swan, to devise a plan and timetable for the abolition of state taxes such as stamp duty by the end of the year. Mr Swan has ruled out increasing the GST as a means of replacing lost revenue to the states.
Mr Baird has previously proposed that the Commonwealth quarantine a proportion of income or excise tax for the states.
In response to the commission’s recommendation, the federal government established a taskforce to investigate new approaches to the handling of low-value imported goods.
The taskforce’s report, released yesterday, recommended the creation of ”simplified GST assessment arrangements” for imports worth less than $1000.
It says a steering committee consisting of senior representatives from agencies such as the Customs and Border Protection Service, the Tax Office, Australia Post, bio-security authorities and the states and territories would be required to oversee the development and implementation of the new processes.
The report estimated that at a threshold of $100 it would cost about $15 per item to collect $22 in GST. By 2018, as volumes increased, the cost per item would fall to below $14 and the GST collected would rise to almost $23.
The chief executive of the Australian National Retailers Association, Margy Osmond, said the report ”states a clear case for change” and called on the federal government to ”act quickly”.
“This modelling shows a cut will raise significant revenue … which could earn both state and federal governments millions of dollars in additional money” .
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