LVT changes not in the bank yet

While state and federal politicians slouch towards agreement that the Low Value Threshold (LVT) for imported goods should be dramatically reduced – or even eliminated altogether – key questions remain unanswered and indeed unasked by journalists covering the story.

Key among those is when any change to the LVT might actually become a reality. Premiers and the federal government this week agreed ‘in principle’ to close the GST loophole. Next step will be a meeting of state treasurers in August to move the process forward.

The Australian Retailers Association (ARA) has urged the politicians to get a move on.

‘The ARA maintains that further progress beyond this agreement must be made quickly, to ensure that Australian retailers are no longer disadvantaged by this loophole,’ it stated in a press release.

‘It is critical that the process does not stall. The agreeance (sic) of state premiers is a good start point, however, it must also be backed up by state treasurers at their meeting next month,’ said ARA CEO Russell Zimmerman. He called for the threshold to not just be reduced but eliminated entirely.

‘The only acceptable outcome of a broadening of the GST to include overseas online transactions under the current threshold of $1000 is to eliminate the threshold altogether.

Federal treasurer Joe Hockey has been thinking along the same lines, telling the ABC on Monday, ‘It may well go to zero’.

With the Federal Government not having a majority in the Senate, the apparent support from the labor Party is another critical box ticked this week on an LVT change. Shadow Treasurer Chris Bowen is quoted as saying said Labor was ready to act ‘constructively’ with the government, and that not charging GST on imported goods under $1000 was unfair for local small business.

And finally the recalcitrant WA treasurer, Mike Nahan, who has been holding out on changes to the LVT until WA gets a bigger slice of the GST pie, has said he will agree to the threshold being lowered provided any extra revenue is distributed to the states on the basis of population.

‘The understanding is, with the changes in Low Value Threshold, there will be additional monies. And we will not get our 30 per cent share, but our per capita share,’ Dr Nahan said.

But so far there has been no agreement between the states about the distribution of additional GST revenue, and the August meeting of treasurers may prove a more hard-ball negotiating environment. (It’s their money.)

With furious agreement in the air, it would be logical to assume a change is a gonna come sooner rather than later. But the ‘Netflix tax’ on GST-free services from overseas sellers is not scheduled to come into force until July, 2017, and it’s hard to see the LVT being reduced or removed prior to that. There would be some synergies and political appeal in introducing both unpopular changes at the same time, rather than dragging them out, but the year after next is realistically the earliest possible date local retailers can anticipate competing with overseas sellers with the same rate of GST applied to each channel.

– So much for the ‘when’. The other big question is ‘how’?

‘The ARA considers the simplest method of collecting this sales tax is at the point of sale. Many international retailers already have mechanisms in place to be able to accept GST at the point of purchase, and we don’t envision that this would involve extra effort on their part, and will not incur any additional costs by the government,’ said Russell Zimmerman (pictured right).

‘All we have to do is get onto the top retailers overseas and get them to put GST on it (purchases) and they will then remit it to the government,’ opined Gerry Harvey. Too easy!

‘We have identified a new way, through Australia’s leadership of the G20, to be able to impose the GST on the supplier,’ Federal Treasurer Joe Hockey revealed.

‘We can go to the Amazons, we can go to the various retailers overseas, and say “you have to identify the goods you are selling into the Australian market” and they will do so, and that is how we are going to collect it.’

– But it might not be the doddle Messrs Zimmerman, Harvey and Hockey assume. Not all offshore online retailers are of the size and visibility of Amazon.  A few minutes browsing eBay will illustrate the ‘many sellers’ nature of global retailing.

Alex Malley, chief executive, CPA Australia, played Grinch by pointing out this inconvenient truth.

‘So while you may be able to address global elephants, like Amazon, the risk is that we get overtaken by the millions of mice following along.’

He said part of this latest initiative will involve international suppliers having to register for GST as though they were an Australian resident, a process that could be made to work with the assistance of the G20.

But he says working with the G20 has its own complexities, so it is far from a done deal. – And then there’s the matter of retailers operating out of countries from G21 on down!