To level the playing field between bricks and mortar store operators in Australia and overseas-based online shops, New South Wales Treasurer Mike Baird is proposing a large reduction in the floor price for general sales tax (GST) exemption for items bought overseas from online retailers.
He suggested cutting it to $30 from the current $1,000 to raise more income for the state governments, help Australian retailers and make the country in line with other nations such as Britain insofar as exemption of goods purchased online from overseas retailers is concerned.
Britain has a $28 (￡18) threshold for GST imposed on items purchased overseas, Canada has $19 (C$20) and the US $200 (A$187).
The Productivity Commission made a similar recommendation in 2011 but also raised concern that the move may not be cost-effective due to the expense of paying for the services of Customs police to ensure collection of the GST. However, Mr Baird said the benefit would outweigh the cost if forecasts that there would be a major increase in online purchases would happen.
Market analysts foresee a 10 to 15 per cent annual growth rate for online retailing. A report by the Low Value Parcel Processing Taskforce discovered that the number of parcels in international mail more than doubled between 2006-07 and 2010-11 to over 48 million.
A similar trend was observed in low-value goods that arrived as cargo which grew by more than 58 per cent since 2008-09 to 10.6 million in 2010-11.
"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," The Sydney Morning Herald quoted Mr Baird.
The commission's estimate is that 2 per cent of all retail sales valued at $4.2 billion were bought from online retailers overseas but 77 per cent of the items were worth less than $100.
Mr Baird said determining potential administration cost and forecasting revenue from the GST for items bought online overseas could be part of the tax reform process among Australian states.
The taskforce recommended that Australia Post and other mail handlers collect the GST.
Australian retailers backed the taskforce's proposal.
"The sector cannot afford to lose more crucial Christmas trading periods before we see a level playing field for Australian retail, which overseas retailers have the upper hand," The Australian quoted Margy Osmond, chief executive of the Australian National Retailers Association.
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