Support for reform to online GST is again gaining momentum, with the new federal assistant treasurer Josh Frydenberg signalling the government’s strongest intentions yet to reduce the GST-free threshold for overseas online purchases.
Frydenberg, who was recently promoted to the assistant treasurer position, has pledged the online GST threshold will be “looked at” in the government’s upcoming tax white paper, calling the current threshold a “reverse tariff” for Australian retailers. The move could see the threshold lowered within the year.
GST avoidance has recently been in the crosshairs of both politicians and businesspeople alike, with popular opinion declaring the current threshold, which is not levied on overseas retailers on any goods under the value of $1000, creates an uneven playing field for local retailers who are forced to charge the tax to consumers.
A recent move by Australia Post to create a goods-forwarding service for international goods was also interpreted as further encouragement for local shoppers to avoid the 10% tax.
Frydenberg’s comments have renewed the government’s commitment to the issue, after Small Business Minister Bruce Billson last year told SmartCompany the government was in talks with states and territories about the possibility of lowering the threshold.
The Productivity Commission looked at the feasibility and cost effectiveness of lowering the threshold in 2011 and found while there were strong in-principle grounds to lower the threshold, such a move may not be cost effective.
Frydenberg last week argued the cost of enforcing a lower threshold was now coming down as payment processes adapted to increased online demand. He also argued the current strength of online sales was further evidence for a need for reform.
“It is not fair to taxpayers, or to retailers or their many employees, to exempt overseas online retailers from the GST even if some consumers are enjoying the ride,” said Frydenberg in a statement.
Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany for many small Australian retailers, the GST was about more than just the 10% tax.
“It’s not just about the 10%, at our end we also have to fill out paperwork,” says Strong.
“The people at Amazon don’t have to do that and they don’t have to charge the tax.”
Strong says the issue of international companies dodging tax is also an issue for the budget bottom line and the Australian economy as a whole, especially as the Australian dollar drops and overseas buyers look to Australian products.
“The GST is collectable and we should collect it from everybody,” he says. “There should be one set of rules – you buy from Australia, you pay GST.”
But Paul Greenberg, co-founder of DealsDirect and chief executive of the National Online Retailers Association, told SmartCompany the issue should be looked at with some perspective.
“If we think 10% will provide holy water, we should think again,” says Greenberg, pointing to research that shows customers are more concerned with choice, variety and larger discounts than a mere 10% discount when shopping online.
Greenberg says while he recognises there are inequities in the flat nature of cross-border trade, he says Australian retail advocacy should focus on the opportunities.
“We have an enormous market, wonderful Australian brands and there is a huge demand for our products. With the Australian dollar staying flat or coming down, it’s about retail meeting or exceeding the offshore offer,” he says.
“Let’s not spend too much time and too many heartbeats focusing on the 10% game.”