Productivity Commission recommends no change for Australia's online import tax, duty threshold

Australia’s Productivity Commission has recommended no change to the minimum $AUD1000 tax and duty thresholds for online imports.
The long-awaited Commission report was released this morning - Friday 9th December and contains 13 recommendations.
No doubt the most significant of these is its recommendation that Australia’s comparatively liberal tax and duty thresholds should remain unchanged.
There is little doubt that the high thresholds are helping power a boom in Australians shopping online at overseas websites.
And, as the Productivity Commission noted, there is also little doubt that the high thresholds are inequitable. Indeed the Commission said that there are strong arguments for reducing the low value threshold.
“There are strong-in principle grounds for the low value threshold (LVT) exemption for GST and duty on imported goods to be lowered significant, to promote tax neutrality with domestic sales.”
But the Commission found that, with the current Australia Post and Australian Customs parcel processing systems, the cost of collecting taxes and duty at lower threshold levels would far exceed any additional taxes raised.
So the Commission has recommended a working party be set-up to help design a new, more efficient system for handling parcels coming from overseas. It said that a new, more efficient system could reduce the cost of tax and duty collection on low value imports. And if the cost of processing is reduced, a reduction in the LVT could become cost-effective.
“Önce an improved international parcels process has been designed the Australian Government should reassess the extent to which the LVT could be lowered whilst still remaining cost-effective.” The Commission has also recommended that the Australian Bureau of Statistics should start collecting and publishing online retail sales data.
Or, more accurately, data on how much Australians are spending online both locally and overseas.
It said separate numbers should be reported for both spending and employment.
The ABS should also distinguish between pure-play online retailers (or etailers as they are sometimes called) and multi-channel retailers, said the Commission. Other important recommendations in the Commission’s final report included the total de-regulation of retail trading houses, including on public holidays. A number of other recommendations were also made, focussed mainly on planning issues. The recommendations are unlikely to satisfy or placate the big retailers who have lobbied hard for a reduction in the tax and duty LVT, such as Gerry Harvey and or Solomon Lew.
Industry lobbies, such as the Australian Sporting Goods Association, also unlikely to be satisfied with the Commission’s findings. But their campaign has had some positive results.
The Commission has endorsed their contention that the current LVT is inequitable, and the broader community now has a greater depth of understanding of the difficulties that the current LVT levels pose for small and mid-size Australian retailers. At the current levels, even quite small retailers can find that their imports are worth just enough to trigger customs duties and GST.
So it seems likely that the government will back the Commission recommendation that Post , Customs and the Australian Quarantine Inspection Service develop new systems that will reduce the cost of processing low-value parcels from overseas.
For more information go to www.pc.gov.au