The Productivity Commission’s final report into the retail sector has recommended loosening regulation on trading hours and zoning, but has recommended no changes to the $1,000 GST-free threshold for goods bought online from overseas.
In a move that will disappoint many sections of the retail lobby, including veteran Gerry Harvey, the Commission says even dropping the threshold to $20 – thus meaning most overseas internet purchases would need to be processed for GST – would not be cost-effective.
“Over 30 million mail parcels would then need to be processed for GST and duty — compared to the level of 20 000 parcels in 2009-10,” the Commission’s report says.
“Lowering the threshold to $20 would raise in excess of $550 million in tax revenues, but the cost of the processing using the current system would escalate to over $2 billion — more than three times the additional revenue collected.”
“Moreover, the Commission’s indicative modelling suggests that, given the current high deadweight costs of collection, even after taking into account the gains flowing from greater tax neutrality, the net impact on overall community welfare would almost certainly be negative.”
The Commission’s Economic Structure and Performance of the Australian Retail Industry report was made public at 11am this morning, after it was presented to the Government on November 4.
While the Commission has recommended a change to the GST threshold should only be implemented if it can be proven to be cost-effective, it has taken aim at the state of the Australian postal sector.
The Commission says the costs of processing and handling parcels is too high and involve too many manual and “clunky” systems.
“The current parcel handling logistics processes used in Australia by Customs and Australia Post need to be significantly improved.”
“In fact, such processes need to be examined even without changes to the LVT as they appear not to be up to the task of accommodating the future demands from the expected growth in online retailing.”
The Government has responded by establishing a retail taskforce which will examine how the recommendations made by the sector – particularly around the GST threshold and improvements to the postage sector – should be dealt with.
“There’s no silver bullet for retail,” Assistant Treasurer Bill Shorten told a press conference this morning to announce the launch of the taskforce.
“[But] retailers shouldn’t regard online shopping as a big brown snake that is a peril to the future of retail.”
As in its preliminary report, much of the Commission’s recommendations are aimed to changes to state and local government regulatory regimes that restrict the ability of Australian retail to compete.
The Commission has recommended the full deregulation of retail trading hours in all states, including on public holidays and has suggested a number of measures to make planning and zoning of retail spaces more responsive and transparent, to ensure “competition is not needlessly restricted”.
It recommended that third-party appeals to planning decisions require clear identification and explanation of grounds for appeal, to better allow courts and tribunals to award costs against parties found to be appealing for reasons other than planning concerns.
The report also said governments should not consider the viability of existing business at any stage of the planning process when assessing individual development applications or specific site rezoning.
The Commission said the Government should examine the retail industry concerns about the operation of the Fair Work Act, pointing to next year’s post-implementation review as a chance for them to be heard.
“This should include consideration of options to address any significant obstacles to the efficient negotiation of enterprise-based arrangements that have the potential to improve overall productivity.”
In what will be seen as a win for book chains such as Dymocks and Collins, which find themselves under intense pressure, the Commission has also recommended a review of the ban on parallel imports of items such as books, to “examine whether the costs to the community outweigh the benefits in relation to the parallel import restrictions”.
The Commission also recommended that the monitoring of the rise of online shopping be improved.
It wants the Australian Bureau of Statistics to monitor and report on the online expenditure of Australian consumers, either by designing new surveys or upgrading existing ones.
