The Federal Government is under pressure from retail giants to lower the GST tax threshold for imported goods, in a move that would severely impact online start-ups.
Imported goods worth less than $1,000 are currently exempt from the GST, but an increasing number of retail groups are urging the Government to lower the threshold.
Gerry Harvey, chairman of retail chain Harvey Norman, has called for an immediate GST tax in a bid to slow consumer spending on overseas online retailers.
“The Government can’t just ignore it. They can’t just say it is too hard, it is too much money… it is sending retailers broke,” he says.
Earlier this year, the Government asked the independent Board of Taxation to examine the threshold, but the board rejected the notion of reducing it.
However, Assistant Treasurer Bill Shorten told the Sydney Morning Herald the Government is still considering it.
“The Government understands the concerns of retailers and other stakeholders about this issue, particularly in light of the high Australian dollar,” Shorten said.
“It deserves serious examination and, while the threshold is good for consumers, we need to balance that against the interests of retailers and the administrative burden on businesses.”
A Treasury spokesperson says it’s “way too early” to speculate over whether the threshold will be lowered, let alone what it will be lowered to.
“I think we’re getting well ahead of ourselves… [The Government is] only just starting to look at it now,” he says.
Jennifer Cromarty, deputy director of the Australian Retailers Association, says in order to make a decision about the threshold, the industry and Government need to look at what is happening already.
“It’s difficult to say what the impact is going to be, but we’re working with a few associations and are going to put forward a paper about some proposals we have,” she says.
“We have anecdotal reports of incidents like pop-up style retail outlets. So that’s systematic abuse, where they may purchase 10 things under the $1,000 threshold and then sell them online in Australia without having paid GST.”
“We’ve heard of people importing ski products overseas, stockpiling these over a six month period and then opening up a shop and selling them. We’re looking for ways in which the system is being undermined.”
“If someone is importing something under $900 every day for quite awhile, that’s when I say we need to look at the framework.”
Internet shopping is estimated to amount to about $12 billion a year or roughly 4% of total retail sales.
Peter Strong, executive director of Australia’s Small Business Council, predicts the figures to increase.
“Internet sales increased by 18% last year, and it is predicted that the increase will be 12% this year. Half of all sales are to overseas businesses,” Strong says.
“This is at a huge cost to the Australian taxpayer through loss of GST income.”
Strong says an ideal tax system would have users charged GST for everything they purchase online.
“Well, 99.9% of sales done online are through a credit card, so there you go. You can make sure they pay the GST,” he says.
“I think if we used the financial system, you can get something done there. But how does that work?”
“We’re going to have to sit down and see how that would work out because I don’t have the answer. But if we do it through the financial system then we can get everything.”
Ruslan Kogan, head of Kogan Technologies, has bit back at claims traditional retailers can’t compete with online stores.
Kogan Technologies is an Australian manufacturer and retailer of consumer electronics devices, selling products direct from China to customers in Australia and the UK.
According to Kogan, Harvey Norman is suffering from an “insufficient business model” rather than increased competition from online retailers.
“These retail dinosaurs are using GST as a cover for their poorly-performing business practices. They are having a whinge and they need to have a good look at themselves,” he says.
“The best way for retailers to react to this is to stand up and realise the power of technology and the internet. If they do this, no overseas websites will compete with them,” he says.