The Government has issued a response to the Low Value Parcel Processing Taskforce report, saying that it won’t lower the GST-free threshold right away, but will begin preparing businesses cases and plans for reforming the parcel processing procedure in general.
The move comes just days after a separate report into the country’s GST system found that the Government should immediately lower the threshold to $500 if it wants to create a competitive advantage for Australian businesses.
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Russel Zimmerman, head of the Australian Retailers Association, said it welcomed the announcement this morning even if there won’t be any immediate movement on the threshold.
“We welcome acknowledgement from government that current parcel handling processes need urgent review, given the current resulting tax loophole is putting Australian retailers – including online Australian retailers – at an inherent trading disadvantage.
The taskforce’s report found that lowering the threshold would provide a benefit, but only if parcel processing procedures are overhauled. This is because right now, the system for tracking and delivering parcels is over-burdened with the huge amount of traffic from online shopping.
Implementing some fixes to the system and streamlining some processes that are currently duplicated would provide an environment in which a lower GST-free threshold could actually be revenue positive.
Under the present postal system, reducing the threshold would cost more money to implement and administrate than it would provide to government coffers.
Assistant Treasurer David Bradbury said in a statement the Government has rejected the need for an immediate lowering of the threshold, but said it will start preparing “business cases and possible implementation plans”.
“A decision cannot be made regarding the possible lowering of the threshold until these business cases and possible implementation plans for reforms to low value parcel processing have been prepared, and the costs associated with any possible changes have been determined.”
Bradbury pointed out that with 58 million parcels flowing through the country ever year, lowering the threshold without introducing any postage reform would “cause major disruptions to the international mail service”.
“The Government recognises that Australian consumers enjoy the convenience and choice provided by online shopping and any tax advantage associated with the low value import threshold for GST are not necessarily a decisive factor.”
However, Bradbury also noted the $1,000 threshold is still high when compared internationally.
Meanwhile, the retail industry has also welcomed a separate report into the GST system, which last week recommended an immediate drop in the threshold to $500.
Australian National Retailers Association head Trevor Evans told SmartCompany this morning the report is an important one, as it points out how much evasion is occurring around the threshold already.
Evans suggests the lower threshold will clamp down on that activity.
“Whether it’s people adjusting invoices, or just avoiding tax on things like cameras. An immediate halving of that rate would mean it would be harder to get around the threshold.”
“To the extent that this threshold is really causing a competitive disadvantage, the sooner action occurs the better.”
This story first appeared on SmartCompany.