01.Retailers blame GST
New research by CHOICE reveals that the campaign by Australian retailers to blame the GST low-value threshold for the industry’s woes just doesn’t add up.
Goods bought from overseas do not attract the GST if they cost less than $1000. This is because research has shown that the cost of collecting the GST on these goods would be more than the revenue it would raise.
Some Australian retailers have blamed this threshold for sluggish sales and have been leading a campaign to reduce it to as low as $20.
CHOICE surveyed online shoppers and found only 12% nominated saving on “duties and taxes by purchasing on overseas websites” as a reason for shopping online.
Our survey also found that although many Australians shop online to get the best bargain, their main reasons actually relate more to convenience than price.
The top reason Australians buy online is so they can shop at the times that suit them, followed closely by the convenience of getting products delivered to their door.
The retail sector is facing some real and significant challenges, but this research shows that the low-value threshold simply is not one of them.
Consumers saving more than 10%
For consumers after a bargain on overseas websites, most claimed they save much more than 10%. Our survey showed that 68% of consumers who buy from overseas websites to save money said they save more than 15%, while 43% said they save over 25%.
The size of these price differences is not surprising considering CHOICE research for the IT Pricing Inquiry last year found Australians are paying around 50% more than US consumers for computer hardware, software, games and digital music.
This shows that even if the GST were applied, overseas websites would usually still cost less.
No 'internet tax'
CHOICE supports a level playing field for Australian retailers, and thinks the threshold should be lowered provided it can be done cost effectively and efficiently, with no massive fees, delays or red tape for consumers.
Retailers have been calling for Australia to adopt a similar approach to the UK, where the Royal Mail charges a £8 (A$13.60) collection fee for parcels that are liable for tax or customs.
If Australia were to adopt this and lower the tax threshold to just $20, as some have suggested, it would push the price of a $20 item bought overseas to more than $35. This means consumers would pay over $13 so the government could collect just $2 in tax revenue.
What CHOICE wants
Lowering the threshold should not rely on inefficient costs of collection – whether paid by government or directly by consumers – outweighing any benefits, which will place even more cost-of-living pressure on households.
Treasury is currently producing a business case for lowering the threshold, and CHOICE awaits the outcome of that process.
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