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Australian States Hopeful Over GST Threshold

by Mary Swire,, Hong Kong

20 December 2012

Australia's federal government has agreed to pursue a reduction in the low value import threshold for goods and services tax (GST), according to the New South Wales (NSW) Treasurer. The claim has however been denied by the federal Treasury.

The pledge was allegedly made by federal Treasurer Wayne Swan at a Standing Council on Federal Financial Relations meeting in Canberra. According to the NSW Treasurer Mike Baird, Swan "outlined his intention to finalize the business cases and compliance structure for lowering the threshold by the end of 2013." This, Baird said, would be a positive step for both state and federal retailers.

"There is still considerable work to do in terms of how this can be administered in the most efficient and cost-effective way, but we are encouraged by the fact that the Commonwealth has today committed to a consultative approach with the States and we look forward to working with them on this," Baird added in a statement released on the NSW Treasury website.

Imports valued below AUD1,000 (USD1,050) are currently exempt from GST. However, Australian retailers consider the low value threshold is high by international comparison and gives foreign online retailers a competitive advantage. State governments also argue that it leads to an unacceptable revenue loss.

While GST is collected at federal level, revenues are distributed to the state governments through a system known as "horizontal fiscal equalization," with the intention that all States and Territories have the ability to provide broadly equivalent services in areas such as education, health and public transport. As a result, States with strong revenue bases receive relatively less GST revenue.

About 55m packages arrive in Australia each year under the low value threshold, and earlier this year, a draft report on the performance of Australia's retail sector said that about AUD578m in additional revenue would be collected in GST if the threshold was abolished. However, it was also said in the report that over AUD2bn of collection costs would be borne by businesses, consumers and government.

But it has since emerged that the commitment may not be as strong as Baird implied. Assistant Treasurer David Bradbury said at the time of the meeting that scrapping the low value threshold is no "silver bullet" to solve States' budget problems, and that there simply isn't the administrative capacity to process tens of millions of low-value imports through the GST system.

TAGS: compliance | tax | business | law | goods and services tax (GST) | Australia | retail | services

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