By Claire Reilly

SYDNEY, NSW: The Australian Government Productivity Commission issued a draft report today, providing “in-principle” support for the introduction of GST on imports below $1,000, but ultimately rejecting the measure as inefficient...for the time being.

At over 461 pages, the Economic Structure and Performance of the Australian Retail Industry draft report enacts a comprehensive analysis of a wide range of factors affecting the Australian retail industry, including tax arrangements, skills and training, workplace regulation and trading hours.

Today’s report comes after months of lobbying for an "even playing field" from industry heavyweights, such as Gerry Harvey, the Australian National Retailers Association (ANRA) and the Fair Imports Alliance which comprises several retail groups, including the Australian Retailers Association.

With the continuing rise in popularity of online shopping (Deloitte predicts the growth in e-commerce will rise by $10 billion in the next three years) many traditional retailers were calling for the low value threshold for GST on imports to be reduced from its current standing at $1,000.

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But the PC did not entirely endorse such a move in its report.

“There are strong in-principle grounds for the low value threshold (LVT) exemption for GST and duty on imported goods to be lowered significantly, to promote tax neutrality with domestic sales,” the report read. “However, the Government should not proceed to lower the LVT until it is cost-effective to do so — that is, at a minimum, the tax revenue should exceed the full costs of collecting it.”

The PC conceded that the same tax rates should, in theory, be applied to all imports in order to minimise “distortions in resource allocation,” so that “competing businesses were treated equally”.

“In principle, foreign retailers sending goods to Australian consumers should be facing the same taxes as domestic retailers,” the report said.

But the PC concluded that “it is inefficient to impose compliance costs on the government and the community in an attempt to collect small amounts of revenue.

“On balance, the Commission is of the view that precipitate action to lower the threshold would bring with it net costs to the community. Further, a small movement in lowering the threshold would not satisfy, in any reasonable measure, the goal of tax neutrality.

“In the Commission’s judgement, an interim and partial reduction would be mainly symbolic and likely to consume resources that would better be devoted to exploring the best and most expeditious manner to reduce collection costs that enable a cost-effective approach to greater tax neutrality.”

One of the key findings of the report, made in relation to low value imports, was the inefficiency of Customs and Australia Post in dealing with the greater number of parcels entering Australia due to the boom in online shopping.

“Once a more efficient system has been fully investigated, utilising international best practice, the costs and benefits of implementing any new process should still be assessed,” the report said.

So while retailers received the in-principle support of the Productivity Commission, it seems clear that it will be some time before the issue is resolved to the satisfaction of retail lobby groups.