Internet shoppers saving $1.3m a day as lost revenue grows 10pc a year By Natasha Bita

 Cyber-Shoppers are costing the federal government $1.3 million a day by buying tax-free imports over the internet, the Treasury has revealed.

 

 Lost revenue from the GST — and the savings to consumers — are forecast to grow 10 per cent each year to hit $610m by 2013-14.

 The Productivity Commission has found Australia's $1000 tax-free threshhold for imported products to be the world's most generous outside Hong Kong, where all imports are tax-free.

 In a report that will fuel pressure from traditional Australian retailers to restrict tax-free imports, the commission says it would be "preferable" to give all retailers the same tax treatment.

 "The number of parcels entering Australia under the low value importation threshold has risen in recent years and is likely to increase further as online shopping becomes more prevalent," the commission says in an issues paper published this week for its inquiry into the retail industry.

 "Consistent with the principle of minimising distortions in resource use, it would be preferable to apply the same rates of taxes to all imports so that competing businesses were treated equally."

 Retailers are lobbying the Gillard government to overturn the Howard government's decision in 2005 to raise the tax-free threshold for imported goods from $250 to $1000, on the grounds it cost Customs too much to police.

 Overseas goods bought over the internet — including fashion, perfumes and cosmetics — are exempt from the 10 per cent GST as well as Customs duty of 10 per cent for clothing and 5 per cent for footwear. But Australian "bricks-and-mortar" retailers, which import goods in bulk to sell within Australia, have to pay both taxes, which they pass on to shoppers.

 The Treasury has calculated the exemption will save shoppers $460m in GST payments this year — enough forgone revenue to pay for the government's promise to fix hospital waiting lists.

 The tax break is forecast to widen to $500m next financial year, $550m in 2012-13 and $610m in 2013-14, according to Treasury costings.

 The commission paper reveals that Australia's tax-free threshold is 50 times higher than Canada's, three times higher than in New Zealand or Singapore, and eight times higher than Japan's.

 It says the commission "understands" that the average value of parcels entering Australia is less than $100 — 10 times below the tax-free limit.

 "Based on the preliminary evidence available to date, it appears that even a large reduction in the threshold may not necessarily have a significant impact on the number of parcels not subject to GST and duty," it says.

 The commission refers to claims by some retailers that smaller retailers are "abusing" the tax-free threshold by buying goods valued at less than $1000 from overseas, and onselling them to customers without paying GST or Customs duties.

 "There is nothing illegal about this practice, but some have alleged that the current regulations in this regard put larger local retailers at a competitive disadvantage," the report says.

 The report says some consumers buy over the internet because they "simply cannot purchase an equivalent product from a local supplier".

©theaustralian.com.au

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