Misguided GST exemption push must be ditched

Almost since online shopping first became available in Australia, retailers have been pushing to cut the $1,000 Goods and Service Tax exemption.

Retailers argue the exemption makes it impossible for them to compete with prices charged by overseas retailers.

Now retailers are being backed by the state governments in their campaign to abolish the Low Value Threshold after a report from Ernst & Young found the move could give states an extra billion dollars a year collectively.

The report is set to be published next week and will show cutting the $1,000 threshold to $20 would bring $997 million to state governments in the 2014-15 financial year if introduced by Christmas, according to a report in The Australian Financial Review.

While it’s easy to sympathise with the plight of the retailers who have to compete on an unfair playing field, the latest push is misguided.

The government has just concluded its inquiry by the Low Value Parcel Processing Taskforce to investigate options to improve the efficiency of processing low value imported parcels.

This taskforce followed a 2011 Productivity Commission report on the economic structure and performance of the Australian retail industry.

There has been inquiry after inquiry into the GST exemption and the findings have all been the same.  Leave it be.

The Productivity Commission found the low value threshold for GST and duty on imported goods was not the main factor affecting the international competitiveness of Australian retailers.

While the commission did find there were in-principle grounds to reduce the low value threshold, it also found it would not currently be cost-effective to do so without significant improvements in the efficiency of processing low value parcels.

Cutting the GST exemption for online purchases to $20 would create an administrative nightmare which may bring in billions in revenue but would also cost billions to implement.

You can bet Australian consumers would not be too happy with the cut as well.

The Australian retail sector is struggling but more creative and innovative ways to boost retailers are needed rather than just continual lobbying against the Low Value Threshold.