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The
argument goes that if inexpensive, yet GST‑exempt, imports
can be taxed, then there would be greater equity in tax
treatment and governments could gain a revenue windfall to
spend.
But Australians should look askance upon
arguments that broadening out the GST capturing our
favourite imported books, dresses, shoes, laptops and the
like, would be advantageous to consumers and taxpayers
alike.
For a start, as recent Institute of Public
Affairs research has noted, it is not the case that simply
slapping GST on low value imported items will necessarily
eliminate price differentials between expensive domestic
retail goods and their cheaper overseas equivalents.
Some Australians do choose overseas online shopping on
account of price differences, and surely it is their right
to do so, especially when they're seeking to stretch their
limited disposable incomes further.
Indeed, the
global e‑commerce market has been a welcome boon for lower
and middle income earners, who can now access cheap product
varieties formerly the preserve of rich airline travellers
accessing duty‑free goods.
As the Productivity
Commission and other economic researchers have noted, the
Australian retail sector is beset with high costs, from an
internationally comparative perspective, which a new tax
just wonʼt fix.
The burdens of prescriptive
regulations, applied to labour markets and land use, means
that the high costs of penalty‑rate wages and exorbitant
commercial rents, respectively, pass onto Australian
consumers in the form of higher, uncompetitive prices.
Ignoring the effects of domestic regulations inflating
retail costs and prices, the vigorous retail industry
campaign to extend the GST is ill‑conceived strategy and
needlessly antagonises the cashed‑up Australian consumers
the industry needs most.
However, to excuse the pun,
we would be selling Australian buyers short if we simply
conceived them to be voracious low‑price seekers only.
Retail trading hours legislation, for instance, limits the
times that domestic retailers can keep their doors open,
meaning online shopping genuinely provides 24/7 retailing
that many time‑poor people prefer. And so removing byzantine
regulations that keep domestic retailers closed, when
customers would prefer otherwise, could help the industry.
During the course of the present debate, some policymakers
have been inclined to ask why some countries with
value‑added taxes impose much lower import tax‑free
thresholds than we do. For example, Canada and the United
Kingdom imposes exemption thresholds for imports valued
between $A20 and $A30.
But it may be that rather
unique circumstances facing revenue collection authorities,
in both of those countries, have had some motivational
influence in maintaining low VAT thresholds.
Canada
shares a border with the United States, one of the largest
economies in the world not to impose a federal VAT, and so
Canadian authorities have imposed a very low import
exemption threshold for its federal GST to wrangle as much
revenue as they can.
The UK, on the other hand, has
several "tax havens" domiciled under its jurisdictions
including low‑taxing islands in the British Channel. On some
accounts, the current British VAT import threshold was
instituted in response to complaints by High Street
retailers of a loss of sales to sellers with an online
presence in the tax havens.
But to solely
contemplate the revenue implications of lowering tax
thresholds for imports would ignore a wider range of factors
that must be considered when establishing good tax policy.
The father of modern economics Adam Smith, no less,
enunciated a range of taxation principles, and one of those
was that taxes should not be overly expensive to collect in
the first place.
Reviews undertaken in Australia, and
in other countries, have investigated the administrative
costs of collecting additional taxes on low value imports
and have mainly concluded it is not worth the effort to do
so.
The Productivity Commission in 2011 modelled the
effects of radically lowering the GST exemption threshold,
and found "in most scenarios estimated, total collection
costs would still exceed additional revenues or generate net
efficiency losses for the community".
It is true our
near neighbour, New Zealand, also imposes a lower import GST
exemption threshold, estimated at about $A360. However, a
recent New Zealand Customs review similarly concluded "a
lower de minimis would not produce worthwhile net gains in
Crown revenue and would increase compliance costs for
importers".
The high‑tax protagonists in this
particular GST debate appear to forget there are sound
economic reasons why governments would, in fact, select a
high tax exemption threshold for imports.
As
evidenced by the progressive lowering of customs tariffs
over the last 30 years or so, Australia has forged a
reputation as a more open trading destination and, so, a
high GST import exemption threshold happens to be consistent
with such policies.
Let there be no doubt that
cheap, GST‑exempt imports have benefited consumers in terms
of accessing more abundant goods and product varieties, but
also by keeping a lid on domestic price inflation. The
relatively high Australian GST exemption threshold on low
value imports has also exempted shipments of minimal value
from the inconvenience of customs formalities, a
trade‑friendly regime especially valuable to smaller sized
importers.
Also considering the fact that extending
the GST burden would simply aggravate Australia's lack of
tax competitiveness, lowering the GST import exemption value
would be detrimental to the interests of the taxpaying
public.
In the end, slashing the $1000 GST import
threshold is nothing more than a protectionist ploy to
discourage global online shopping and privilege domestic
retailing, using the general tax system rather than
selective tariffs to do the dirty work.
If
policymakers cave into the calls for an extended GST on
imports this would be a major step away from the
pro‑consumer, trade facilitation policies Australia has
worked so hard to institute.
Source: Brisbane Times , dated 23/01/2015
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