Retailers have welcomed the Gillard Government’s decision to implement recommendations of the Low Value Parcel Processing Taskforce as the next step towards lowering the low value threshold (LVT) for goods purchased overseas.
The Taskforce has recommended the current low-value import threshold should be reduced and halved almost immediately, with no change needed to either GST laws or customs arrangements. The review panel also found the existing system with its $1,000 threshold was being abused.
Australian Retailers Association (ARA) executive director Russell Zimmerman said the announcement was a welcome acknowledgement of the need to reduce the LVIT both as part of closing a GST loophole currently disadvantaging states and to remove the competitive disadvantage currently borne by Australian retailers compared to their online overseas counterparts.
“We welcome acknowledgement from government that current parcel handling processes need urgent review, given the current resulting tax loophole is putting Australian retailers – including online Australian retailers – at an inherent trading disadvantage,” he said.
“It’s important to note this is not a ‘bricks vs. clicks’ battle; rather, the increasing amount of Australian retailers operating online are also on an unlevel playing field as a result of the GST loophole.”
Similarly, National Retail Association (NRA) CEO Trevor Evans also commended the Taskforce on the report.
“These findings are very welcome. The onus is now on the federal government to take action to put our retail industry on a more equal footing with foreign online competition. We cannot allow this report to become like the Henry Tax Review, gathering dust on a shelf somewhere in Treasury,” he said.
Assistant Treasurer David Bradbury admitted the current threshold is “very high” compared with overseas and so the government will begin preparing businesses cases to further examine how the changes can be made.
“A decision cannot be made regarding the possible lowering of the threshold until these business cases and possible implementation plans for reforms to low value parcel processing have been prepared, and the costs associated with any possible changes have been determined,” he said.
A final response to the Taskforce report, outlining the outcomes of these processes, will be released in 2013.
Bradbury also said even though online retail sales, both domestic and overseas, still only account for around six per cent of overall retail sales, it’s an issue that needs to be addressed.
“While this is not the biggest challenge confronting the retail sector, the government does recognise that on the basis of fairness and tax neutrality, Australian retailers should not be disadvantaged by taxation arrangements which favour overseas retailers.”
The work of the Taskforce followed the 2011 Productivity Commission (PC) report into the retail sector. The PC found the low value threshold for Goods and Services Tax (GST) and duty on imported goods was not the main factor affecting the international competitiveness of Australian retailers.