Opinion: Australian Government’s ‘Parcel Tax’ Won’t Help Aussie Businesses Or Consumers

Opinion: Australian Government’s ‘Parcel Tax’ Won’t Help Aussie Businesses Or Consumers

Opinion: At the Australian treasurers’ tax summit today, one topic on the table has already been agreed on in principle: cutting the $1000 threshold for collecting goods and services tax on parcels bought online internationally by Aussies. Choice is calling it a “parcel tax”.

Online shopping image via Shutterstock

$1000 GST-Free Threshold Abolished: Overseas Online Shopping To Become 10% More Expensive

“Lower, simpler, fairer” is the hue and cry going out across the country from the federal level of government on tax reform, and it seems like “lower” in this case means dropping the GST-free threshold significantly below its current $1000-plus level. But I can’t really see what is “simpler” or “fairer” about it.

GST is Australia’s third largest source of revenue, and in 2013-14 was responsible for $56 billion that was dispersed to the states and territories — for things like building roads, train lines, water treatment facilities, hospitals and the like. That apportion is the topic of some controversy itself, by the way — NSW gets the lion’s share of GST revenue, with Victoria and Queensland in close contention for second place and all other states and territories far behind.

But it’s generally agreed by all levels of government that more tax revenue is a very useful thing. And that’s why state treasurers, and Federal Government treasurer Joe Hockey, are effectively united in wanting to remove or lower the $1000 GST-free threshold.

But there’s a problem with lowering the threshold. Massive costs in putting a system to monitor purchases, impose a tax and collect it from Australian consumers, as well as the cost in manpower and technology of actually running that system at the scale that Aussies shop online, would mean that lowering the GST-free threshold could actually cost more than it earns. That was the conclusion of a 2009 Productivity Commission report on the topic.

Unless something has radically changed since then, revenue from policing online shopping wouldn’t be that significant, and the enforcement headache for consumers and postal services would be significant.

In the discussions today, Labor-held Victoria’s treasurer Tim Pallas wants the threshold to be as low as possible without it dropping below the point where collecting the tax would exceed the revenue gained — which sounds like a zero sum game. NSW treasurer Gladys Berejiklian also wants the threshold to encompass as many online purchases as possible.

The problem for businesses is that even after the GST-free threshold is dropped, even if it’s abolished, it will still be cheaper for Australians to buy some items, especially high-tech products like notebooks and smartphones and cameras and lenses, online. It’s not going to help out local businesses as much as the treasurers might think, and it’s not going to raise as much money as expected.

I recently bought a macro lens for my Samsung mirrorless camera through the B&H Photo Video website. B&H, based in New York, is a mainstay of Aussie camera geeks, because even after considerable shipping costs through DHL its prices are still almost always significantly less expensive than buying the same product from an Australian stockist. Not to take into account the fact that I couldn’t even find that particular lens in Australia, because it’s a niche product. This is exactly why I buy things online in the first place.

DHL’s Oceania chief executive says a GST-free threshold drop would “clog up” the system of deliveries, both for courier companies and Australia Post. Australia Post is struggling with the steep drop of letter deliveries, but the only thing keeping its head above water is the healthy up-tick in parcel deliveries — up 21 per cent year on year. Kick online purchases in the teeth and you may as well be kicking Australia Post.

The Federal Government’s Better Tax website called for submissions on tax reform earlier this year, and in March delivered a discussion paper that said that not only were physical deliveries of online purchases under scrutiny, but purely online transactions were also in the crosshairs:

“Imported goods (but not imported services) are generally subject to GST, unless the value is $1,000 or less. On the other hand, most imported services and intangibles purchased by consumers (primarily those purchased online, such as multimedia downloads) are not subject to GST.”

So once that GST-free threshold is gone and your online purchases start getting taxed heavily, your streaming services and eBooks are next. That particular slug — the ‘Netflix tax’ — kicks in from the start of July 2017.