GST: Has Gerry Got His Wicked Way?

Has Gerry & Co’s. whining paid off?
The government could be about to up tax on online purchases as recommended by a new GST review.

Currently, the Australian government does not charge GST on online goods worth less than $1000 purchased from foreign retailers, something which a gang of local retailers kicked up a stink over in late 2010, led by Harvey Norman chairman, Gerry Harvey, with Myer, David Jones and all supporting the stance.

But the new report into GST, which addresses the online issue is believed to recommend the government broaden the tax net to catch an additional $4.2 billion for the public coffers, “by either lowering the $1000 tax free threshold or imposing tax on offshore suppliers,” reports the AFR.

However, the report’s authors insist it does not suggest a particular rate of tax to be imposed on online sales and is more long-term in outlook.

If the threshold was reduced to $30, it could push prices up as much as 10%.

But the Low Value Parcel Processing (LVP) Taskforce, set up by the Productivity Commission to examine how customs could process thousands of parcels coming in from overseas, indicated it would be very tricky and may cost more to administrate than what the government would net in tax.

But considering Wayne Swan’s massive ambitions to move the budget to surplus, a change to GST policy may well be on the cards in the future, provided it is feasible.

Currently, just 2% of total purchases are from overseas sellers or $4.2 billion, compared to 4% from domestic retailers, although is expected to grow up to 15% annually over the next three years.

“All we are looking for is for all retailers to play fairly,” says Australia Retail Association Executive Director, Russell Zimmermann, told Channel News.

“There is huge support [for GST reform] from pure online players in Australia also,” to fix the “loophole” in the GST rules.

However, reform is likely to be a gradual one, as the government needs to figure out how to make it worth their while collecting the tax, ARA boss added.

“We want to work with the government to ensure it pays them and ensure it doesn’t end up costing the states,” says Zimmermann.