Applying the GST to online overseas sales of less than $1000 appears more likely after a key Federal Government minister criticised the existing exemption.
New assistant treasurer Josh Frydenberg says exempting overseas online retailers from the 10 per cent impost on goods and services is not fair to taxpayers, retailers and their employees.
“This is not a level playing field,” he wrote in The Australian today, adding that local retailers effectively faced a reverse tariff.
Frydenberg argues the $1000 threshold is out of step with other western countries, citing much lower levels in Canada ($C20) and the UK (STG15) and no exemption at all in the United States.
“If these nations can adopt a lower threshold, why can’t we?”
Frydenberg acknowledged the cost of compliance was relatively high, a reason used by the previous Labor government to retain the threshold.
But as online sales increased, that cost would come down, he said, noting recent data.
Between 2008/09 and 2010/11, the number of goods valued below $1000 increased by 58.2 per cent while the number of goods between $1000 and $5000 grew by only 18 per cent.
A good tax system was characterised by simplicity, efficiency and fairness, Frydenberg said.
That was why the online GST threshold would be looked at in the Government’s strategy review of the tax system.
The willingness on the part of governments, federal and state, to deal with the issue was a test case for the nation’s ability to adapt to the growing digital economy, he said.
Meanwhile, Federal Government backbencher Dan Tehan is calling for a broadening of the GST, arguing it would deliver up to $21.6 billion in extra revenue annually.
He says allowing minimal exemptions to the goods and services tax is a better option than lifting its 10 per cent rate.
The Coalition in 2015 must begin where it left off when last in government by finishing its reform of the tax system, the Liberal MP said.
While other OECD countries had applied value-added taxes more broadly, Australia had an aversion to broadening “this taboo tax”, either due to flawed arguments of unfairness or political cowardice.
“One only has to look across the ditch for inspiration,” Tehan wrote in The Australian Financial Review today.
Since its introduction in 1986, New Zealand has raised its GST twice. It also recognised from the start that the only way to reap a full GST benefit was to have minimal exemptions.
In addition to overseas online purchases of less than $1000, fresh food and health and education services are also exempt from the GST in Australia.
The NZ GST covered 96 per cent of consumption, while Australia’s only covered 47 per cent and is shrinking, down from 53 per cent a decade ago, Mr Tehan said.
He dismissed as an “intellectually lazy argument” that broadening the GST would hit the poorest in society.
“This completely ignores the fact that applying welfare through an indirect tax means that everyone gets the exemptions.”
The GST will be examined in the government’s strategic review of the tax system in 2015.
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