An interesting report this morning from NAB showing that the rumblings of a lowering of the GST threshold will do absolutely nothing except cost taxpayers to police it:
Online retail sales have increased significantly over the past few years, and in recent times there has been a renewed focus on the taxation implications of international sales, with sales valued less than $1,000 currently exempt from GST. Our special report this quarter highlights the typical spending patterns in online retail, with the average online transaction in October 2013 at $41, down from $64 in January 2010.
A number of factors may have influenced this decline – including price deflation, changes to shipping arrangements (that may encourage fewer items per transaction) and changes to sales by category – with an increasing share for the relatively low cost Media category over time.
In the year to October 2013, the majority of online purchases were relatively low value. 90% of all online transactions were under $100 and this was the case for both domestic and international sales. In contrast, less than 3% of transactions were over $250 and just 0.2% were over $1,000. The average transaction size increases uniformly with age – the under 25s have the smallest average spend and the over 65s the largest.
This indicates that under 25s make a comparatively large number of lower value purchases (largely in the Media category), while the over 65s make fewer, higher value purchases.
Alan Oster, Group Chief Economist, NAB
The great value of the NORSI report is that the data it provides is so immediately relevant to retailers who are facing challenging conditions and a constantly shifting landscape. Since the Federal election, there’s been significant discussion\ about the lowering of the GST threshold below the current $1,000 for overseas purchases. That issue has become a very hot topic across both the Federal and State governments.
I wish I believed my own headline. The whole idea of a lowered GST threshold will be scrapped now, right?. Wrong. It’s my belief that the retail rentiers have only launched phase one in their campaign. Once a threshold and infrastructure to police it is established, the precedent will make it much easier in future to lower the price at which the tax is applied. In fact to not do so will make no sense as the government will be losing money. Or so the argument will run.
The big battle is won and the war to extract rents from Australian households is going swimmingly.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
