Documents from Customs and Treasury reveal that the departments were looking at halving the $1,000 tax-free threshold for imported goods last year, and that halving the threshold could cost $38 million over four years.
The documents, released under Freedom of Information laws after a request from the retail lobby group Fair Imports Alliance, say that the earliest such a move could occur would be July 2011.
Fair Imports Alliance, which is pushing for higher taxes on imports, said this morning the emails might be a turning point in the debate, because they demolish the Government’s view that a decrease would be economically unfeasible.
The $38 million figure is much lower than expected, alliance spokesman Brad Kitschke told SmartCompany, and well below foregone revenue figures previously announced.
“I’d be surprised, given the information we’ve received, if the Productivity Commission doesn’t recommend a reduction in the threshold,” Kitschke said.
Kitschke said while the body had been lobbying the Government on the issue last year, it wasn’t aware that the option had been costed.
“If we had known that the Government knew how much it would cost, the argument would be over.”
A Productivity Commission draft report into the issue will be released next month.
A spokesman for Assistant Treasurer Bill Shorten told SmartCompany the Minister had asked Treasury to consider potential policy options and their cost “as any prudent Government should” after the issue was raised in the press and by various stakeholders.
He added that the Government then referred the matter to the commission in “good faith and will give due consideration to its recommendations.”
Prominent retailers such as Harvey Norman and Myer have complained that excluding imports valued at under $1,000 from GST payments was benefitting online retailers at the expense of bricks and mortar retailers.
A released Customs email from November last year says the earliest possible date for the implementation of a reduced low-value goods threshold of $500 would be July 1, 2011.
The emails also suggest that Customs, the Australian Taxation Office, Border Protection and Treasury meet to discuss options.
“Implementation would be contingent on the application of a processing charge (to be applied to importers/industry) to offset implementation costs, estimated to be a minimum of $38 million over the Forward Estimates period, with future resource requirements expected to increase over time, consistent with any increase to cargo volumes over time,” the email says.
The emails also show that total department expenses to reduce the threshold to $500 for the four years to 2014-15 would be $39.5 million, under an IT solution. The email confirms that IT systems would take two years to set up.
For the first year it was expected to cost $10.3 million, before falling to $9.8 million in 2012-13, $9.7 million in 2013-14, and $9.8 million in 2014-15.
For a no-IT solution, the email puts the cost at $42.3 million.
The emails point out that the “departmental costings only provide some explanation of what the relevant costs are.”
Additional costs would be incurred by transport and logistics providers, Australia Post and potentially AQIS.
“Further work with these parties would be required to estimate these other costs.”
“Such costs may include, for example, storage costs for industry.”
Shorten’s office this morning said that, “Customs and Border Protection makes it clear in the documents that the costings, which are now outdated, are approximate.”
“Many of the documents quote an estimate that halving the threshold to $500 would lead to a possible three- to four-fold increase in the number of articles requiring processing.”
“New data, gathered during the recent three month enhanced compliance campaign between January and March 2011, indicate that the increase in processing would be significantly higher, placing an even greater burden on Customs resources than first predicted.”
“This burden would create additional costs for Customs and the Government and longer waiting times for consumers.”
“Based on the findings of the enhanced compliance campaign, Customs and Border Protection has provided the Productivity Commission with a submission outlining the implications of a lower threshold.”
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