(Transcript from World News Australia Radio)
State treasurers have met with their federal counterpart, Joe Hockey, to discuss the possibility of lowering the GST threshold in a bid to secure millions of dollars in extra revenue.
As Thea Cowie reports the federal government has developed a business plan on lowering the GST threshold, which the Treasurers will study before making a decision next year.
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At present, overseas-purchased goods valued at less than $1,000 are exempt from the 10 per cent consumption tax.
But state treasurers and the retail industry would like to see the threshold dropped to just $20.
New South Wales treasurer Mike Baird says there's a lot of revenue at stake.
"In principle there is strong agreement to do the work to bring it forward because it's a massive amount of money. I mean billions of dollars are being leaked away from the system and that's an opportunity to put - from a state government point of view - into our schools, hospitals and into our transport. It's something that we seriously need to do."
The GST is a federal tax, but all the revenue it raises goes to the states.
Two years ago a Productivity Commission study found reducing the threshold to $20 would raise an extra $500 million in revenue, but it would cost nearly three times as much to administer.
The study found that under existing systems it would cost about $1.6 billion to process 30 million parcels.
Matt Levey from consumer group CHOICE says, without changes to parcel-processing systems, customers will bear the cost.
"In that case we would have a situation where you would purchase something, let's say you bought a book for $20 from overseas. In addition to paying the $2 GST you would also pay the company that who delivered that parcel upwards of $13 for their services in actually collecting and remitting the GST. So it effectively turns a $20 purchase into over $35 and that money is essentially being paid by the consumer."
The New South Wales treasurer says states will be working to ensure that if the threshold is lowered, it's done so in the most cost-effective way.
Mr Baird admits the business plan presented by the federal government shows reducing the tax wouldn't increase revenue immediately.
"It does show in the first year or two that the costs of collection are higher than the revenue generated, but then the trend gets much more positive the longer you go. Online retail sales are growing at 15 per cent per annum. It is a growing and significant distribution channel for sales. At the moment in terms of the GST system it is a massive leakage."
The Australian Retailers Association's Russell Zimmerman says six per cent of retail shopping is done online and two per cent of that is done on overseas websites.
But he says online sales are expected to double by mid-2016 and some Australian businesses will fold under the pressure.
Mr Zimmerman is calling on the Treasurers to take a long term view of retail sales.
"We're talking about the future of retail, the future of jobs in Australia. To all the listeners they will either be working in retail, know someone who works in retail. To those people I would say that if they want to see those jobs remain in retail, those young people being employed, then we need to have the premiers seriously look at this, see the threshold lowered."
But consumer group CHOICE says increasing the GST is unlikely to increase local spending, with research showing only 12 per cent of shoppers use the internet to escape the tax.
Prime Minister Tony Abbott is staying out of the debate, saying the GST is essentially a state tax and it's a matter for them to decide.
But if the federal government does oversee a lowering of the threshold, it may be accused of breaking an election promise.
Mr Hockey told the ABC there will be no change.
HOCKEY: "Let me be very, very blunt. Very blunt. We will not be changing the GST, full stop. End of story."
JOURNALIST: "No matter how many terms of government?"
HOCKEY: "I have said it once, I'll say it again: we will not be changing the GST. Full stop. End of story."
Meanwhile Tasmania and South Australia's Labor premiers say the Liberal states are pushing for much broader changes to the GST.
But Queensland's Liberal National Party treasurer denies there was any discussion of increasing the rate or extent of the GST.
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