Australia’s peak economic advisory body claimed there are justified grounds to charge GST on internet purchases of $1000 and less. But to do so effectively, it will take years and have a minor effect in reducing retail decline, reports the SMH.
“Other factors such as much lower prices, greater range of products-that is, choice- and convenience available online appear to be far more important drivers,” the Productivity commission said in a draft report on the retail sector.
Bricks and mortar stores have been facing difficulties coping with the shifting sales dynamic, as many struggle to adopt an online presence despite the help of different government bodies. With more consumers shopping online, the brick and mortar outlets are ‘invisible’ to prospective customers.
Although the commission acknowledged the pressures retail outlets are facing, they believe a broad restructuring will help them compete with domestic and online sales. Currently, online sales account for 6% of sales annually, a percentage that doesn’t really convey a $12.6 billion stake.
Although only a draft, the report believes changes to Industrial Relations laws are necessary as current legislation is too rigid. Also recommended are the state wide deregulation of trading hours and new planning and zoning laws.
Changes to zoning would increase competition for shopping centre landlords, whose high rental fees disadvantage smaller retailers.
The government will not offer a formal response until the final report is compiled and released in November, but it is believed it will work with the states to overhaul zoning laws and retail rental policies to aid small businesses.
The inquiry was commissioned in December after big retailers demanded the $1000 threshold for GST and customs duty be lowered, as overseas goods being sold online do not incur the charges, allowing them to sell rival products more competitively.
If implemented, the checking of the millions of packages would cost more than the excess revenue generated, costing taxpayers more, generating delays and clogging up customs.
In 2010-11, the mail system managed 45 million purchases under the current $1000 thresh hold, with another 10 million being delivered by couriers.
33 million of the 45 mil were estimated to cost below $100. If the thresh hold was lowered to $20, an extra $500 million in revenue would be generated, however, the cost of checking the extra parcels would be $1.6 billion.
It has been suggested by the commission that the government should innovate the clunky custom process by putting together a taskforce, or by developing another way to calculate the taxes on low end purchases.
Assistant Treasurer Bill Shorten, who was responsible for commissioning the inquiry, showed little enthusiasm about dropping the current threshold, deeming it ‘crazy’ if it was implemented straight away.
The executive director of the National retail Association Gary Black condemned the commission, claiming their inability to act would result in business failure and jobs being shifted overseas.
