Australian Retail Inquiry Focusses On GST

by Mary Swire, Tax-News.com, Hong Kong

08 September 2011

The public hearings of the Australian Productivity Commission’s inquiry into the future of the Australian retail industry continued this week, with bricks and mortar retailers feeling strongly about internet retailers benefiting from the the low value threshold for goods and services tax purposes. The government commissioned the inquiry in response to some of the country’s largest retailers asking for the tax-free threshold to be stopped.

The majority of retailers consider the low value threshold (LVT) of AUD1,000 (USD1,060) gives foreign online retailers a competitive advantage. However, in its draft report published last month the Productivity Commission said that where the costs of collecting a tax exceed the benefits of the revenue, that tax should not be collected, and that where the recipient of a parcel is a business registered for GST, the LVT has little effect on GST revenue since an input credit will be claimed.

Approximately 55m international parcels arrive in Australia under the AUD1,000 threshold. While data is limited, the Commission estimated that with current processes, without the low value threshold, about AUD578m of revenue would be collected and over AUD2bn of collection costs would be borne by businesses, consumers and government. It said that these costs are a “deadweight loss on the community”.

In a public hearing on the inquiry Productivity Commissioner Phillip Weickhardt described the views of many of the retailers as ‘protectionist’, reiterating the fact that removing the tax exemption would make little difference.

Gary Black, executive director of the National Retail Association (NRA), told the hearing that he believed the difference in price caused by the GST exemption was between 11% and 23%.

The NRA has suggested that 80,000 jobs will be lost if the customs and tax playing field is not levelled. Its submission to the Productivity Commission included modelling which tracked the increase in the overseas share of the on-line retail market over the next five years and forecast an exponential rise in on-line shopping and in the overseas share of on-line shopping. It said that this will result in a shift of retail trade between 10% and 20% off shore which will in turn result in massive retail job losses.

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