Andrew Leigh

GST = GOVERNMENT STRUGGLES ON TAX 

The Turnbull Government’s plan to jack up the GST would be doubly damaging for Australian consumption if it does not enforce the same tax rules on overseas retailers.

A report in today’s Australian Financial Review highlights the risk that foreign companies selling goods online will simply ignore their obligation to charge GST and send the money back to Australia when new laws come into effect from next year.  

At the moment, goods bought online worth under $1,000 are 10 per cent cheaper than in Australian shops because foreign companies are exempt from collecting GST. The Government intends to abolish this threshold in 2017, but there are question marks over how it will enforce this change. 

Given that the government is on its third Assistant Treasurer in two years, it is not surprising that complex tax matters are not getting the focused attention they need.

Raising the GST to 15 per cent on locally-sold goods without properly enforcing this for online purchases would further widen the price gap for Australian businesses. It would drive even more shoppers to spend overseas at a time when Australian retailers are already coping with flat or falling sales.

Individual businesses can’t afford to see their sales shrink even further, and neither can the Australian economy. Domestic consumption accounts for about 60 per cent of the total economy, so any drop will have far-reaching implications for the nation’s economic health.  

Treasurer Scott Morrison has acknowledged that he is relying on consumption to keep our economy growing, describing it as “the most important thing for us over the next 12 to 18 months”.   

Cutting into household budgets by making everything more expensive and driving shoppers to spend more overseas would have exactly the wrong effect on consumption. In 2014, Japan’s economy fell into recession after a rise in their consumption tax caused an immediate 2 per cent drop in consumption.

The longer this Government’s ‘conversation’ about the GST goes on, the clearer it becomes that hiking the rate would be bad for families, bad for Australian businesses and bad for our economy.  

WEDNESDAY, 6 JANUARY 2016

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