In a new twist to the seemingly interminable debate over applying GST to products purchased from offshore retailers, the NSW Treasurer says lowering the current threshold will soon be affordable.
Mike Baird, the NSW Treasurer, is urging the Commonwealth to drop the threshold for GST applied to products purchased from offshore retailers. He proposes lowering the threshold from $1000 to $30, stating that future growth in online shopping will make the move cost effective.
Last year, the Productivity Commission investigated the costs and effects of lowering the GST threshold, which resulted in the commission raising concerns that the move would be more cost more to execute than the revenue it would generate. On the other hand, it has been pointed out that many of the associated costs would be once-off investments and that the scheme would quickly pay itself off.
Baird instead highlights the predicted growth of online retail, which he says will make the initiative cost-effective in the near future.
“It’s clear that the GST base is growing less than anticipated and the government needs to look at all options to replace revenue that is essential to deliver services and the building of infrastructure,” Baird told Fairfax.
“It’s time that we seriously consider online retailing because it is growing exponentially and means that our domestic retailers aren’t competing on a level playing field.”
If the recommendation to lower the GST threshold to items purchased for $30 or more, the majority of offshore purchases would attract 10 percent extra in tax, with 77 percent of overseas purchases falling shy of $100. The Productivity Commission’s report estimated that as much as two percent of all retail sales ($4.2 billion) were from offshore retailers.
Baird’s recommendations come in response to a request by federal Treasurer Wayne Swan, who has requested a roadmap for the abolition of state taxes such as stamp duty. Baird has pointed to the potential revenue gained from lowering the GST threshold as a means to offset lost revenue from state taxes.
Is this development the ray of hope local retailers have been looking for?