Government dashes retailers’ hopes of lowering GST threshold, says proposal is “crazy”

Retailers’ hopes of having the GST-free import threshold slashed have been dashed after Assistant Treasurer Bill Shorten yesterday described the proposal as “crazy”, saying it would cost more money than it could bring in.

The comments come despite a number of lobby groups welcoming the Productivity Commission report, saying it gives the Government scope and a mandate to drop the threshold, among other methods, in order to increase competitiveness in the retail industry.

Shorten has told the Australian Financial Review that even though the Government does support lowering the threshold in principle, “the idea that the taxpayer, in order to enforce that principle, would spend $1.6 billion… is just plain crazy”.

At the heart of the contention is that the Productivity Commission found the cost of collecting new tax revenue increases every time the threshold falls. It found that even if it dropped the threshold to $900, about $15 million extra revenue would be found at a cost of $8.6 million.

“On a simple arithmetic analysis, such a threshold appears feasible. But this would leave 99% of parcels with no tax and duty collected, making little difference to tax neutrality and failing to address concerns about ‘level playing field’ competition.”

It also goes on to say that a small lowering in the threshold would not satisfy the goal of neutrality, and is likely to be “mainly symbolic”.

Shorten said last night on the 7.30 Report that evidence shows most items people buy are under $100, well under the threshold at which collecting GST becomes too costly.

“The fact of the matter is everyone who buys items under $100 still has to pay the freight and international postage and handling, so there’s already a natural barrier to competition from overseas. The real issue here is that the GST and getting rid of the exemption in first blush is not going to change the world of retail or just cost consumers another 10%.”

Retailers have latched on to comments within the report that say the Customers and Border protection offices, along with Australia Post, are inefficient and must be streamlined. Doing so would also increase the likelihood of collecting more revenue from lowering the GST threshold.

Brad Kitschke, chief executive of the Fair Imports Alliance, says he is pleased with that recommendation.

“It validates the concerns we’ve been having for the last few years. We want to see the customs and border protection services taken to task, so that the reduction can be implemented in a cost-effective basis.”

He also dismissed comments from within the report itself which suggest the GST threshold is only a minor issue.

“Whether it’s a minor issue or not, this is a very serious body that has recommended a lower threshold. The ball is now in the Government’s court to have the willingness to make changes.”

However, the Government has made it clear there is no political will to reduce the threshold.

“‘There’s no way you could sell that bill of goods to the Australian people,” he told Fairfax, regarding the proposal.

“You’ve got to have a look at how you’re doing your own business rather than just expecting taxpayers to foot the bill when you’re taking high profits”.