Taskforce to nowhere

I’ve been chewing over the Productivity Commission’s report into the retail sector for the last few days, a good deal of which was spent in shopping centres frantically buying Christmas presents and wondering why I hadn’t done the shopping online this year.

My take is pretty simple – the retail lobby groups have a snowballs chance in hell of getting this Government or any other to reduce the $1,000 GST threshold on goods purchased online from overseas.

Assistant Treasurer Bill Shorten is set for a bigger role in Julia Gillard’s front bench reshuffle and his handling of this retail issue might be a good reason why. It’s been very clever politics.

The GST threshold issue raised its head in January, when Gerry Harvey and Solly Lew led the charge in what turned out to be something of a PR disaster.

Shorten responded with a Productivity Commission inquiry that took most of the year. He then responded to the inquiry by setting up a much hyped “taskforce” that will now spend three to six months looking at whether the GST threshold can be reduced.

Pretty smart, isn’t it? The Government has now managed to put off tackling the GST issue for up to 18 months, while at the same time creating inquiries and taskforces that give the impression they are carefully considering the matter.

You can hardly blame Shorten and the Government.

While they do need to be seen to be listening to Australia’s giant retail sector, there are no votes to be won by effectively telling consumers that you want to stick a 10% surcharge on that book or DVD they are buying from Amazon.

It wouldn’t be a great way for an ambitious bloke like Bill Shorten to endear himself to the masses.

Besides, as the Productivity Commission showed, the Government cannot afford it.

Lowering the threshold to $20 (and thereby capturing most online overseas purchases) would raise just $550 million in tax, but cost the Government $2 billion in processing fees.

So the net cost would be $1.5 billion – which is exactly the Government’s projected Budget surplus for 2012-13. There is no way the Government is finding room for that.

Maybe the Productivity Commission is wrong. Maybe there are cheaper ways to collect the GST and the net cost can be reduced. But it remains very difficult to see the Government backing the retail lobby groups on this at any case.

Julia Gillard’s front bench reshuffle is likely to add to retail lobby groups’ job of getting a threshold reduction through.

Within a few days we’ll have a new Assistant Treasurer and a new Small Business Minister. Those new ministers will need a bit of time to get their feet under the desk and their heads around the retailers’ arguments. That could push things back even further.

The retailers might be better served turning up the pressure on the Government to get on with a few other Productivity Commission recommendations, including deregulation of trading hours and a review of labour regulations in the area.

Getting change in these areas won’t be easy either, but right now it looks a lot more achievable than a change in the GST threshold.