“Collecting GST from low value imports may inconvenience the consumer and incur huge costs that defeat any tax raising purpose,” said Dale Boccabella, an Associate Professor at UNSW Australian Business School.
State treasurers are meeting in Canberra today, where they are expected to sign off on lowering the low-value import threshold from $1,000 to virtually zero, for physical items bought over the net and bought by Australian consumers.
“The issue is, how is it going to be collected, who will collect it, will there be extra fees for collection, and will larger overseas suppliers have to register for GST while smaller ones will not?”
“We may end up with some goods passing through the mail stream marked as ‘GST already paid’, while with others from smaller suppliers, consumers may have to directly pay the GST on delivery,” he says.
Other countries, like the US, are now actively raising their consumption tax threshold to avoid exactly this problem. In the US, their Senate is proposing to increase its threshold from $US200 to $US800, bringing it roughly in line with Australia’s current level.
“Until there is a more cost-effective way of collecting tax on low-value products where the tax has not been collected from the offshore supplier, lowering the threshold will not necessarily make sense from a revenue collection point of view. It would just cost too much to collect relative to revenue raised.”
Polling from Essential Research suggests Australians are opposed to any lowering of the GST threshold. People aged 35-54 are particularly hostile, with 57% opposing such a move.
Dale Boccabella, and UNSW colleague, Kathrin Bain, have researched the GST low value threshold, and he suggests “if GST was imposed on internet orders sent from overseas, the actual cost could rise by nearly a third - much above the 10% suggested by retailers.”
They have calculated that a $500 item bought over the web from overseas could end costing between $650 and $750. He said this is because “if Australia Post is required to collect and remit GST for those suppliers under the turnover threshold, they may recoup the costs of doing so from the consumer. The Department of Agriculture, Fisheries and Forestry is also likely to levy charges in support of its biosecurity obligations.”
He adds “the cost will be even higher if GST is levied on transport and insurance costs, which is currently the case for goods above $1,000.”
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Julian Lorkin: 02 9385 9887