REUTERS Visitors chat next to the Ebay logo at the CeBIT computer fair in Hanover March 2, 2011.
Because lowering the threshold from the current $1,000 for online purchases made by Australians would only cost more than the federal government would earn, the consumer action group CHOICE proposed a flat tax rate of $14 on parcels.
The flat rate would also be lighter on the pocket of consumers rather than pay a GST tax and a processing fee which would increase their bill by 37 per cent.
In a modeling, CHOICE cited the case of the UK processing fee which increased the price tag of an item to $56 from $38.
Alan Kirkland, chief executive of CHOICE, warned that consumers would have to pay $823 million more if the GST-free threshold would be cut from the current $1,000, with smaller purchases such as items originally worth $20 going up 70 per cent to $36 if the 10 per cent GST and processing fee of $14 is imposed.
The proposal appears to make sense since more than 75 per cent of online purchases made by Aussie consumers from overseas sites are below the $1,000 threshold.
The operators of big bricks-and-mortar stores such as Harvey Norman are, however, batting for a lower GST threshold even if it would not earn the government extra revenue so consumers would be turned off by the higher prices when buying from online stores overseas and shop instead in local stores.