Online Prices To Rise…As GST Chorus Gets Louder?

Online shopping in Oz could be about to get more expensive.

If GST review group and local retailers have their way, that is.

Former premiers and directors tasked with a review of the GST have called for a cut in the tax threshold for goods and services bought online.

The GST review final report, released Friday, says the current low-value import threshold should at least be halved from $1000 to $500 – a move that could be done almost immediately with no change needed to GST law or customs arrangements.

The review came in the wake of calls by major retailers including Harvey Norman, David Jones and Myer that the lack of GST on goods purchased from overseas worth under $1000 meant that Aussie goods were less competitive, since local retailers pay 10% GST on all goods sold.

Nick Greiner, John Brumby and tax expert Bruce Carter, reckon the way the 10 percent GST applies to online shopping is hurting Australian businesses and costs the states “hundreds of millions of dollars” in lost revenue.

Many Aussie retailers view it as a tax loophole and say it is hurting their business in a time of huge challenges in the current retail environment.

“That the low value import threshold for GST be lowered to prevent the ongoing erosion of the GST pool. Initially, the threshold should be lowered so that it does not exceed $500,” the GST Distribution Review Panel’s report states.

“This should occur as soon as practicable.”

The threshold would be reduced to “no more than $20 or $50” meaning online goods purchased from foreign retailers could rise as much as 10%, if the threshold was set at $30.

The GST reform , if implemented, would also be a nice earner for state governments, who are in dire need of the cash.

However, most observers believe there is zero chance of the Gillard Government introducing such an unpopular change in the run-up to the 2013 election.

An incoming Coalition Government however might well look at it.

The report suggests in the long term, governments should look at replacing the “at-the-border” collection of GST with a system that imposes a GST liability directly on overseas suppliers of goods and services to Australia.

Previous investigations have indicated collecting GST could be more costly to implement than the revenue that could be collected, however.

The Australian Retailers Association (ARA) also voiced its support for the recommendation in the latest GST review, to reduce the Low Value Imports Threshold (LVIT), saying it is “welcome news.”

“As the direct line between government and the retail industry, the ARA is committed to ensuring Australian retailers- whether they operate in store or online- are on a level playing field with their online overseas counterparts marketing products to Australian consumers,” said ARA Executive Director Russell Zimmerman

“Reducing the LVIT is a simple and economically beneficial solution which needs to be implemented without delay.”