COSBOA calls for scrapping of GST import threshold but Choice says retailers are missing the point

The Council of Small Business Organisations of Australia says it supports moves to decrease the tax-free threshold for online purchases, as Customs emails from last year revealed the cost of halving the threshold to $500 would amount to about $38 million over four years.

If the Customs data is correct the cost of administering the tax each year (around $10 million) would easily be covered by the extra revenue raised. In March, a Productivity Commission issues paper said that for 2010-11, the GST revenue foregone had been estimated at $460 million, rising to $610 million in 2013-14, although Treasury noted that the estimate reliability was low. In theory, this suggests revenue raised each year from cutting the threshold in half would be $200-300 million.

“We have a policy in Australia that you pay GST on your purchase,” Council of Small Business of Australia executive director Peter Strong says, adding it is COSBOA’s policy that there is no exemption for online purchases.

“I don’t care if you buy something on a computer.”

Strong says while the Government has indicated that it’d be too much work for not enough reward to individually tax online purchases, “small business also knows that the GST is too much work.”

Another issue, says Strong, is the likely impact on the budget if Australians continue to buy online.

“They’ll have to collect that foregone money from somewhere,” Strong says.

But consumer group Choice says the push by retail group Fair Imports Alliance to reduce the tax-free threshold and make online purchases more expensive is missing the point.

A Choice spokeswoman Ingrid Just says the current $1,000 threshold for avoiding GST on online purchases is an appropriate level and should not be changed.

“The feedback we get is that it’s the convenience, the product range and savings of up to 50% that makes people shop online,” Just says.

Just says even if the tax-free threshold were reduced to 50% or scrapped altogether, retailers in Australia would need to address these drawcards.

“Online retail is here to stay,” Just says.

“It’s about finding ways to utilise an online presence and build a business that incorporates that or look at ways they can foster their own unique product or service to shoppers.”

The Fair Imports Alliance said yesterday the Customs email proves that it is not economically unfeasible to reduce the threshold, and believes the Productivity Commission would be hard-pressed to recommend it stay in place.

A spokesman for Assistant Treasurer Bill Shorten said yesterday that the Minister was aware of the $38 million figure from Customs, but said the number was only one part of a much larger issue, hence the Productivity Commission review.

The Commission’s draft report into the issue will be released next month.

The Shadow Small Business Minister Bruce Billson this morning said the Coalition was “keenly awaiting” the release of the Productivity Commission report before forming its view, although the emails released yesterday had blown out of the water arguments that costs would be excessive.

There are questions on whether the Government would be willing to take on this hot-button issue, considering many consumers would object to paying more for online goods.