Let the GST exemption go through to the keeper

Much has been said over the past few weeks by Australian retailers about their dire position as a result of our Goods and Service Tax (GST) laws, which exempt certain overseas purchases via the internet. If you take on board some of the commentary going around, you might believe that the $1,000 GST exemption for imported goods is the sole reason behind declining consumer spending across the country.

But, as with any debate like this, you have to take what you hear and read with a grain of salt.

The fact is, the GST exemption was put in place to provide relief from the significant compliance problems that would exist if every single importation into Australia – regardless of its value – had to be subject to GST.

Imagine if you had a friend overseas who sent you a birthday present (worth $100) via mail. Before you received the parcel, you would get a message from the Customs Service saying that before you could receive your present, you would have to send them $10! It may sound harsh, but that’s precisely what would happen if the GST exemption didn’t exist.

It would probably not be a very happy birthday!

The $1,000 exemption is there to ensure that these kinds of scenarios don’t arise. You can argue whether or not $1,000 is too generous. Ultimately, no matter where the line is drawn, someone is bound to disagree with it.

A little over a year ago, the Board of Taxation, an independent expert tax policy adviser to government, looked into the importation exemption. They concluded, based on the investigation and analyses they carried out, that due to the compliance problem that would arise if the threshold were reduced or removed, no changes were needed.

Australian consumers who choose to buy goods online from an overseas location do so because of a range of factors, such as currency exchange, the quality and availability of a comparable product in the Australian marketplace, and perhaps the GST. So, while the tax exemption would feature in the decision-making process, it is not the sole motivating factor. The argument progressed by Australian retailers fails to acknowledge the other factors influencing consumer spending.

At the end of the day, the $1,000 GST exemption exists for very good reasons. To move forward, the government should clearly explain its policy position to the retailers, and then move on to important policy initiatives. I believe the government should let this issue go through to the keeper.