The Federal Government has examined the feasibility of halving the $1,000 tax-free threshold for imports but says the cost of implementing the change would be more than $38 million.
Government documents reveal Treasury and Customs officials have investigated how quickly the threshold could be cut to $500 and what the administrative costs would be.
At present, all imports less than $1,000 are exempt from GST, although domestic retailers are calling for the threshold to be cut or removed, saying it gives overseas online retailers an unfair advantage.
Emails from Customs staff, sent in November last year, reveal cutting the threshold to $500 would increase administration costs by $38 million over four years.
A $500 threshold could also increase the number of products that require processing by up to four times, Customs has claimed.
Customs was asked to identify the earliest possible date of reducing the threshold. It’s since been revealed that Customs could have made the change as early as July 1 this year.
Treasury has previously estimated the Government misses out on $460 million a year in forgone revenue due to the threshold, indicating this will rise as more consumers shop online.
The Government said earlier this week more extensive work completed since November revealed administrative costs would be “significantly” more than $38 million, although no figure was revealed.
Brad Kitschke, a spokesperson for the Fair Imports Alliance and a vocal opponent of the tax-free threshold, says the documents contradict the Government’s claims.
“The Government has always claimed a lower threshold would be administratively unfeasible but these documents reveal otherwise,” Kitschke says.
“They show that it could be done, that plans were in place to reduce the threshold and advice was sought as to the earliest possible start date.”
Kitschke says the information also demonstrates the Government was considering reducing the threshold prior to the announcement of the Productivity Commission inquiry, which is currently investigating the competitiveness of the Australian retail industry.
“We always felt there was more information out there that Customs was not providing us with… It’s concerning that Customs didn’t fess up before the Productivity Commission’s deadline for submissions,” he says.
“Now that we have proof a lower threshold is both administratively feasible and economically beneficial, we eagerly await the Productivity Commission’s recommendations when its draft report is released in August.”
Kitschke says while there are some sectors of the retail industry that would probably welcome a reduction in the threshold, the Fair Imports Alliance would like to see it removed altogether.
In its submission to the Productivity Commission, the Fair Imports Alliance has called for six key recommendations:
- Removal of the tax-free threshold.
- Transition funding for domestic retailers to better engage in the digital economy.
- Tariff reductions to allow consumers to access imported goods at cheaper prices.
- Branding of domestic e-tailers as “Australian”.
- A dedicated government minister with responsibility for the retail sector.
- The creation of retail advisory structures.