By Melinda Upton and Rebecca Kay (Sydney) 

In recent months, the Australian federal Treasury has come under intense pressure from local retailers and state treasures to extend the Australian goods and services tax (GST) to overseas-purchased goods and services. On 27 November 2013, the Australian Federal Treasurer, Joe Hockey, met with state treasurers to discuss these controversial proposals for reform.

At present, goods and services purchased by Australian consumers from overseas are exempt from the 10 per cent GST, provided they are valued at less than $1000. National retailers argue that this gives foreign retailers a price advantage and encourages Australian consumers to shop extraterritorially. In an era where the profile of international retailers in Australia is spiraling as ever-increasing numbers flock to the region’s shopping malls and high streets, the threat looms large. Some national stores such as Myer believe the import loophole affects them so badly that they may even be forced to consider shipping products via New Zealand, so as to put themselves on a level-playing field with foreign competitors.

In support of their stance, retail groups have been keen to emphasize the tax revenue stream that reducing, or even removing, the GST threshold would generate. Russell Zimmerman from the Australian Retailers’ Association commented recently on ABC News “The Government, through the Productivity Commission Report, was told that if the threshold was lowered to $100 that there would be in excess of $500 million worth of tax collected. However, we believe that if the threshold was lowered to around about the $30 mark, collection of goods and services tax would be in excess of $1 billion”.

However, not all are in favour of reform. Some economics experts point to research by the Productivity Commission in 2011, which concluded that the cost of administering the revenue collection against additional imports caught by an extension of GST would be higher than the amounts raised. It has also not gone unnoticed that the federal government had originally promised that GST would be sheltered from reform during its first term.

Consumer group CHOICE also warns that it is Australian shoppers who will bear the brunt of the proposed “internet tax” : “Australia does not need a new tax on the internet designed to prop up parts of the local retail sector, hitting consumers with big costs and delays, and dragging down our competitiveness” (Matt Levey, Choice campaign director). The pressure group also points to the results of a survey which it conducted earlier this year, which found that only 12 per cent of Australian consumers selected savings on duties and taxes by purchasing on overseas websites as a reason for shopping online. For most of those surveyed, factors such as convenience were felt to be more compelling.

At the November Treasury meeting in Canberra, the federal Treasury was presented with a range of potential options and state treasurers were given an opportunity to air their views. However, reports from the meeting were disappointingly vanilla. A statement released by Joe Hockey said “On GST, the states were provided with the material they had previously requested on the costs of any changes to the online threshold. They will now consider that advice…There was no agenda item to discuss any changes to the base or rate of the GST.” Indications are that a final decision has been deferred until March 2014.

For now then, it seems that Australian consumers are free to take advantage of the overseas GST exemption while they do their 2013 Christmas shopping. However, the debate is far from off the agenda, and national retailers will be determined to get their proposed reforms in their shopping bags.