Report rallies against online GST

 

laptop, keyboard, e-commerce, onlineExtending the GST to online overseas purchases of $1000 or less would be an expensive and damaging mistake, according to new research released by the Institute of Public Affairs.

The report, No to the GST attack: Why the exemption for online purchases must stay, argues that putting a GST on low value imports will not help Australian retailing, and will only succeed in making Australians pay more when shopping online.

Dr Mikayla Novak, senior research fellow at the Institute of Public Affairs and the author of the report, said the government should rule out this anti-consumer and protectionist proposal.

“This proposal will do nothing to limit the advantages of internet shopping. It would still be cheaper to buy low value products from overseas retailers online than local retail outlets in store, even if the GST exemption is revoked,” Novak said.

“For example, a copy of the novel Gone Girl is available for $25.98 at Dymocks or $13.94 from online overseas retailer bookdepository.com. If the GST was applied to this, the cost from bookdepository.com would only rise to $15.33, still leaving it 41 per cent cheaper than buying from Dymocks.”

“The tax would also be so hard to collect that the costs of extending of GST would exceed the revenues collected. The Productivity Commission found that reducing the GST low value threshold down to $100 would have raised $495 million for the government in 2010-11, but it also would have cost the government $1.2 billion to collect it.”

“The only thing extending the GST will achieve is increasing the cost of living for Australians, for no good reason,” says Novak.

The report also argues that the true path to reviving the Australian retail industry is to liberalise the regulations that contribute to the high retail costs in Australia.

These problems include a highly regulated labour market, severe land use restrictions, and trading hour conditions.

“If the government is serious about helping the Australian retail industry, it should liberalise it. There are many problems with the Australian retail industry. The answer to those problems is certainly not removing the GST exemption on low-value imports.”

The full report, No to the GST attack: Why the exemption for online purchases must stay, is available to download here: https://ipa.org.au/publications/2322/no-to-the-gst-attack

Comments

11 comments

  1. Mal posted on January 19, 2015

    At least they could use real numbers if they want to bang this drum. I do not understand the idea that the government should be footing the bill for calculating and collecting the GST on imports. On shipments greater than $1000 this gets passed on to the importer. From bookdepository's own FAQs: GST is calculated as follows: (AUD $ Value of Goods + International Freight +Insurance + Duty) @ 10% Security Fee is approximately $10 Also, effective from the 1st July 2009, the Formal Declaration Fee (formally known as the formal entry fee) imposed by the Australian Customs Service will be added to the bill - $55.20. A typical order of $1000 may end up costing an additional $250 once cleared through customs. That's more like 25%, not 10%. I appreciate that even if the rate was 25% the example given would still end up around 33% cheaper than local, but at least I'd feel like the study was done with honesty in good faith, rather than the way it appears to be, i.e. a pre-defined position looking for support. The real question isn't about cost to consumers, it's about tax avoidance, something the IPA are openly big fans of. reply

  2. Terry posted on January 20, 2015

    Yeah - they do need to use real numbers. Also, labeling this anti-consumer is nonsense. As a retailer that imports, I can't have the conversation detailing all our importing costs (including very large amounts of GST) with every customer who queries why it is more expensive here than overseas. They are not interested (and nor should they be) in my problems. I'm also sick to death of hearing about the cost of administrating this tax. They don't care about the huge cost to small business of administrating the GST. Seriously. Institute of Public Affairs - get a real job. reply

    • Lars Winberg posted on January 20, 2015

      Could not agree more with you Terry. Perhaps they should get a real job. I have been in retail for over 30 years and we know what a small retail business have to do to survive and that includes GST administration. If they keep the $ 1000 threshold for imported goods, they should also, in fairness, exempt all purchases, purchased in Australia, under $1000. Lets have some logic and fairness. reply

  3. Figjam posted on January 20, 2015

    Mal, I 100% agree. There is no earthly reason why the GST on imports can't be 10% of the purchase price plus a handling fee of $50 (or whatever is needed to cover the collection costs). reply

  4. Rick posted on January 20, 2015

    Cost to consumers is only part of the story. GST is a tax for the states and one of their main sources of revenue. It needs to be protected. Cheap for consumer isn't the main game here - a balanced healthy economy with a good ratio between cost of living and average wages is important as is business profits. reply

    • DJ posted on January 20, 2015

      Currency change will also moderate online imports until local stocks are price increased due to forward exchange buying being used up. At that stage another wave of growth will occur. We have to consider that the business owners of Government - us taxpayers are stimulating Government to control their costs. We are living in a slightly artificial tax time as when the loss of tax collected at the petrol pump is factored into estimates we will see some billions of revenue gone. Utopia is not a brickless and mortarless landscape. reply

  5. Peter Knock posted on January 20, 2015

    This is a Headline looking for evidence to prove a pre formed view.The real problem is as far as the book example goes, it is not apples for apples. The researcher seems to have picked an international price quoted for the title which is the cheapest discounted price available vs an Australian RRP, whereas the same title can be purchased from another Australian retailer for 1c more, delivered including GST. reply

  6. Stuart Bennie posted on January 20, 2015

    Here we go again !! On Friday 9th I wrote an article - Nostradamus and 2015 - This is how it read. "LVIT At the risk of boring readers to death, this debate has come and gone for years. At the moment it has raised its head yet again and sooner or later the LVIT will drop due to pressure from certain lobby groups including of course, the retail industry. In summary, what effect will the above have on retail in 2015? • The LVIT will drop but will have no material effect on retailers in Australia because the GST pales into insignificance compared to overseas on line prices" For how much longer are we going to debate this topic ? I intend to write an article on Friday 23rd January in a vain attempt to put this to bed. reply

  7. Alex posted on January 20, 2015

    Firstly a report from the IPA is not worth publishing in the Retail News. The IPA is a very right wing lobby group. They represent a very small percentage of Australia and definitely no interest in small business. The GST and clearance fee could be made payable at the Post Office when the package is picked up. APO claim to be the distribution arm of online sales. reply

  8. Eddie Peters posted on January 20, 2015

    Folks, some of you will know that I have been campaigning and still are to change the threshold to $0. Why, because it’s fair to everyone in Australia if they make it the same. If business has to pay then so should private buyers, or simply don't have any Customs Fees, Duty or GST on anything that sells for under $1000 for everyone. You know that can’t happen, because the country would be bankrupt in no time at all because just about everything we buy is under $1000, so they would hardly collect any GST at all. So, Let’s Forget that idea. The way it sits at the moment, the Government in a way is placing a penalty tariff on all goods purchased by Aussies in Australia by making business add those costs to all goods and services in Australia and making us business owners send those fees and GST to the ATO when we do our BAS. The present system is therefore encouraging Australians to buy overseas, thus supporting those overseas companies and employment for their people and they are not paying even 1 cent in taxes to Australia. That doesn't make much sense at all particularly as Australian Businesses employ us, our kids and our future generation. Overseas companies DON’T! So, we now get onto the argument of collecting the GST so that it is cost effective to Australia to do so. In my business I buy a product, we'll call it a widget. I then add my profit margin to cover all my costs, like rent, phones electricity, wages for my staff, Holiday pays and the GST and hopefully if we have a reasonable week there will be some lefty over for me. If there isn't, I don't take home any pay that week. Does that sound familiar to a lot of business owners? Ok, I am also an unpaid Tax Collector. I have to do my BAS monthly and send to the ATO my GST and PAYG taxes and they don't pay me a cent to collect it for them. I do actually pay my accountant though to work out what I have to pay and to submit it for me to the ATO, so now I am actually paying out of my pocket to work out what I have to pay the ATO. Something isn't quite fair here as well but then that's what we do and I am sure thousands of accountants around the country are very happy that they get the job of doing the BAS for most of their clients. Maybe we could get Overseas Accountants to do it for us, then we could get it much cheaper and not have to pay any GST on those fees either? Only joking, but let’s face it we could do it particularly if we have accountants saying the GST threshold shouldn’t change. This is Australia after all and we have to look after ourselves first. They are supposed to be supporting business in Australia and making sure we remain competitive in our own country. There is a company in the Philippines that will do all your accounting work and marketing etc for just $6 and hour and NO GST,. I have their contact details just in case your accountant is one of the few who don't want the GST threshold changed to $0. Back onto collecting the GST. Let’s call $1 a widget and assume the banks and financial institutions deal in $1 widgets like we in business deal in widgets of products or services. So, every time a person sends money ($1 Widgets) OVERSEAS the bank simply adds GST to their widget. It’s simple, buy something online for $100 and $110 comes out of your account whether you paid by bank transfer or by credit card. The Banks then just like us, become unpaid tax collectors and send the GST to the ATO when they do their BAS. I seem to remember that they used to collect a FID and a BAD taxes in the past, so it’s nothing new for them to do this as well. So where's the added cost now for the Government to collect the GST? There isn't one. SORTED and FINAL. reply

  9. Eddie Peters posted on January 20, 2015

    I refer to Stuart Bennie's post above. Just thinking, that if they drop the GST Threshold to $0 Stuart believes that it wont make the slightest difference to people still importing goods from overseas, then he shouldn't object to them dropping it to $0 at all! Does that sound right to you? From the reports in the paper and comments from some people that it wont make the slightest bit of difference then they too shouldn't object if they do drop the GST threshold to $0 and we all pay the same, then why don't we just do it. Those who still want to support overseas companies rather than Aussie Companies, then they can still do so as it obviously isn't going to make any difference to them at all. Just remember the next time your car hits a pot hole, that roads get fixed with GST income, the same as we build schools for our kids and Hospitals for us all. Maybe those who support the $1000 Threshold remaining in place could send their kids overseas for their education and any medical services they require. Sounds fair to me. You wouldn't expect us Aussies to be there for you when in need if you weren't there for us when we needed you to support Australian Companies would you! If you are going to support overseas companies and taxes in other countries rather than our own country then maybe the next move could be to pack up your bags and move there as well????? reply

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