The Government agrees with everyone about GST on cheap imports

The Federal Government’s initial response to the controversial issue of lowering the $1,000 GST threshold on imported goods is an amazing piece of work. It has managed to find common ground between all sides of the debate, while delaying the need for real action until well after the next election.

Assistant Treasurer David Bradbury, who released the report yesterday, knows the Government is caught between the devil and the deep blue sea on this issue.

On the one side are the retailers, whinging (quite reasonably, at least at a theoretical level) about the unfair playing field that the $1,000 threshold hands to online retailers from overseas.

On the other side are eCommerce loving consumers who don’t want to see the Government bring in what would effectively be a price increase on goods bought online from overseas.

Bradbury has managed to please everyone with some deft footwork.

Do you think the real issue is Australian retailers charging too much, rather than the GST threshold?

So does David: “The Government recognises that Australian consumers enjoy the convenience and choice provided by online shopping and any tax advantage associated with the low value import threshold for GST are not necessarily a decisive factor.”

Do you think that unfair playing fields are bad?

So does David: “While this is not the biggest challenge confronting the retail sector, the [Federal] Government does recognise that on the basis of fairness and tax neutrality, Australian retailers should not be disadvantaged by taxation arrangements which favour overseas retailers.”

Do you think that there is a halfway point and the threshold cut be cut in half?

So does David: “The Government also acknowledges that the current threshold of $1,000 at which GST is collected on low value parcels is very high by international standards.”

Do you think that the whole thing’s the fault of the postal system?

So does David: “A decision cannot be made regarding the possible lowering of the threshold until these business cases and possible implementation plans for reforms to low value parcel processing have been prepared, and the costs associated with any possible changes have been determined.”

Do you think it’s all too hard?

So does David: “With around 58 million parcels entering Australia under the low value import threshold each year, lowering the threshold before putting in place significant reforms to processing capabilities would cause major disruptions to the international mail service and result in major inconvenience to the businesses and consumers that rely upon it.”

Do you think that dropping the threshold would cost more than the revenue it would collect?

So does David: “Without greater efficiencies in the system, the cost to taxpayers of collecting the GST on low value parcels would also outstrip the revenue that is collected.”

Essentially, Bradbury and the Government have managed to agree with the consumer groups and the retailers, all at the same time and all in an earnest “we-take-your-views very seriously” response.

And given this philosophical dexterity, there’s only one course of action to take – delay any action.

“As part of its response to the Taskforce, the Government has rejected calls for an immediate reduction in the threshold, but will begin preparing business cases and possible implementation plans for reforms to low value parcel processing.”

Business cases? Possible implementation plans?

While this may well be “consistent with the Taskforce report and is necessary in order to examine in further detail the reforms recommended in the Taskforce report and ensure that costs and benefits of any changes are carefully considered” it is also a brilliant way of passing the problem on to someone else.

The Government’s final response to the review isn’t due until next year. Presumably any “businesses cases” would take another year or so to put together with the sharpest minds at Customs and Treasury on the case, before the “possible implementation plans” finally appear around 2016.

And even then, any changes are likely to need to be slowly phased in, probably over three to five years given what are very real complexities of this system.

I shouldn’t be too hard on Bradbury as this is a bugger of a problem to fix or even find a place to start.

But by appeasing everyone, the Government is sending a clear signal to retailers – nothing will happen here.