'They may not set the average australian's pulse racing and Senator Barnaby Joyce once quipped that he often uses them as a replacement for toilet paper... '
However, Productivity Commission reports are taken seriously by the Federal Government and the recent review into the retail sector (Page 22) is no exception.
One of the most contentious findings of the review was that the Low Value Threshold (LVT) for imports to be subject to the GST, should not be lowered from its current $1000 - meaning that local consumers can continue to purchase items free of GST as long as they are valued at less than $1000. The commission found that while this issue was clearly having an effect on local retailers, the cost of collecting the GST on such imported good would far exceed the revenue collected. In response the Government has set up a "taskforce" to investigate whether the tax could be collected more efficiently. So if the Government is in favour of protecting local retailers, and the real issue is the cost-benefit equation, finding a solution shouldn't be much of a "task".
Several countries already operate LVTs much lower than in Australia. The United Kingdom charges a Value Added Tax (VAT) on all imports valued at more than £15 (A$25). The UK's Royal Mail provides several options for payment including in post offices, by phone or online. UK Customs even has special arrangements that allow some overseas traders to charge, collect and pay the import VAT for goods purchased on the internet. Now the VAT in the UK has recently been increased to 20 per cent, making it somewhat more profitable to administer this collection process. Another excellent example is Canada where their GST is only five per cent. Canada Post calculates the tax payable and charges a handling fee of $5 upon delivery. There are numerous other examples of countries that successfully collect a GST or VAT on imports, so finding one that matches the complexities of the Australian market shouldn't be hard.
It's also worth noting that most of these countries also collect duty on imports valued over $100, but as duties on most items imported into Australia are quite low or in the process of being removed, this is less of an issue here.
So what happens while this taskforce is whipped into action? Well, while the dollar sits around parity, consumers will increasingly purchase products online from overseas. One defence against this is for local wholesalers to renegotiate regional pricing with their international suppliers; There are many advantages for international brands to maintain a local agent. However if they want these benefits to continue, they will have to give a little in the short term. My understanding is that many wholesalers are going through this process at the moment. Hopefully it can feed through the chain fast enough to stem the flow of consumers switching from bricks to clicks.
James Boston
Editor / Publisher
james@bostonpublishing.com.au
