Prime Minister Tony Abbott and Small Business Minister Bruce Billson are meeting with Australia’s largest retail chiefs today, as the debate to lower the GST threshold on online goods once again intensifies.
It is expected state and territory ministers will reach a decision next week in regards to the push from bricks-and-mortar retailers to see the GST threshold for online goods lowered from $1000 to $20.
At the last Council of Australian Governments meeting the state and territory treasurers were urged to think about their position ahead of the next meeting, which is likely to be before the end of the month.
Former Western Australian treasurer Troy Buswell had opposed the plan to lower the threshold, but since he stepped down earlier this month there is renewed hope the states could come to a consensus.
Billson told SmartCompany a change is possible, although did not signal how low the threshold would be lowered.
“If a change was to be made in this area it would need the agreement of all the states and territories,” he says.
“The Treasurer has made it clear the federal government will further develop the business case should all the states and territories wish to move in this direction.”
Billson says the federal government is in conversation with the states and territories.
“We will continue to work with the states and territories should they all wish to address this anomaly,” he says.
The issue has been hotly contested with Productivity Commission findings about the economic benefits of the tax contradicting research by the Australian National Retail Association and Ernst & Young.
In 2011 a report from the commission found the tax change would result in a greater economic burden than benefit.
“Lowering the threshold to $20 would raise in excess of $550 million in tax revenues, but the cost of the processing using the current system would escalate to over $2 billion — more than three times the additional revenue collected,” the commission says.
“Moreover, the commission’s indicative modelling suggests that, given the current high deadweight costs of collection, even after taking into account the gains flowing from greater tax neutrality, the net impact on overall community welfare would almost certainly be negative.”
In contrast, an EY report found the economy could grow by $9 billion and 77,220 jobs could be created.
Billson says the government believes in “tax neutrality and tax efficiency”.
“Our initial investigations have revealed there would need to be a change to the collection system and this is what the business case is about,” he says.
“You have to look at this holistically. What are the effects on the economy in terms of traditional retailers and what are the effects on the revenue of the states and territories and whether there are any like unintended consequences.”
Australian Retailers Association executive director Russell Zimmerman told SmartCompany the organisation supports the push to lower the GST threshold, but admits there are issues around how the tax would be collected.
“There have been three or four different measures proposed in terms of taking collections, such as registering the companies overseas to collect GST and then have a barcode read as it comes through customs,” he says.
Zimmerman says there have been estimates of between 30 to 120 retailers as being the main source of international purchases from overseas, and some of these retailers already automatically calculate GST on purchases over $1000.
National Online Retailers Association chief executive Paul Greenberg told SmartCompany the retail industry should take a back step from being “vanguards” on the issue.
“We don’t think the retail industry should be calling for this. We need to be cautious about calling for a tax… I think it’s a valid conversation, but from a NORA perspective it shouldn’t be seen as a smokescreen for innovation,” he says.
“We need to recognise online retail as an opportunity, not a threat. Australia has previously been focused on the threat, and didn’t realise the rich markets now open to Australian retailers.”
Greenberg says the issue should be raised in the G20, so that all countries can be on the same page.
“Global trade is an enormous opportunity; let’s not knock it down… Anything which could impede the fast flow of goods is punitive. If it slows down parcel delivery at all we will not be supportive,” he says.