Will overseas purchases become 250 per cent more expensive? Source: Getty Images

Currently, purchases under $1000 from overseas retailers do not attract the 10 per cent goods and services tax, but the federal government is pushing ahead with its plans to extend the GST to nearly all overseas purchases.

Australian retailers claim the current tax exemption hurts their business, while the government sees it as tax base erosion as shoppers increasingly move online.

In its submission to the government’s Tax Discussion Paper, Choice claimed plans to lower the threshold could add costs of up to 256 per cent for purchases under $100.

“Collection and processing fees [could turn] a $20 book from an overseas online store into a $72 book,” Choice campaigns director Matt Levey said.

That figure is based on a 2011 Productivity Commission report, which estimated the cost of collecting the tax would be $50 per parcel.

The National Retailers Association and the Australian Booksellers Association have panned the analysis, accusing Choice of running a “scare campaign” and using a “ludicrous mashup of figures”.

The retail industry wants the GST to be collected by overseas retailers themselves, as opposed to it being Customs’ responsibility on a per-parcel basis.

“We know what would happen because other jurisdictions have done this,” National Retailers Association chief executive Trevor Evans said.

“The vast bulk of books [purchased online] at the moment go through just a small number of very large, very reputable multinational companies. Those guys will voluntarily comply. We know they will because they voluntarily comply with other states and countries. They care about their reputations.

“The idea that adding 10 per cent GST is going to add 250 per cent to the cost of books is outrageous, incredibly misleading, and it doesn’t even allow us to have a sensible debate about the reasons why we should or shouldn’t close this loophole.

“This is a scare campaign by a group looking for a reason to campaign against something which is really about protecting Australian jobs and the integrity of our tax system.”

Australian Booksellers Association chief executive officer Joel Becker said Choice “should be ashamed of themselves for creating this sham of an argument”.

“Choice, for unfathomable reasons, has taken a discredited four-year-old report and created a ludicrous mashup of figures,” he said. “The idea of a $50 service fee being added to the cost of a book is absurd.

“No one is suggesting that Customs would take responsibility for collecting the GST. It would either be required that the offshore business collect it in the same way that tens of thousands of small businesses collect GST in Australia, or it would be collected by the credit card companies using a software ‘widget’ at the time of purchase.”

Mr Levey said if there was a proposal that showed how the GST could be applied without costing more than it raised, Choice would support it. “The question we would ask is, what’s changed since [the Productivity Commission report in] 2011?” he said.

“A system which put the GST on at the point of overseas purchase and only added a 10 per cent cost to the consumer is something we’d furiously support,” he said. “But it hasn’t been done.”

Mr Levey said many of the examples of other countries were quite different from Australia. “European countries are part of a common market, the US has much lower prices of consumer goods than Australia. There are different dynamics at play.”

He said lowering the threshold had “been held out by every Australian retailer as the holy grail ever since Solomon Lew and Gerry Harvey put it out there”.

“We don’t apply taxes just to benefit certain parts of the retail sector, we apply them to benefit the community,” Mr Levey said. “It’s all about workability.”

Agreement is still being sought with the states on lowering the threshold, but the government appears optimistic that bipartisan support can be reached. A number of Labor figures including South Australian Treasurer Tom Koutsantonis have supported the idea.

Assistant Treasurer Josh Frydenberg, who has previously argued local retailers were operating “with one hand tied behind their backs”, told news.com.au it was an issue the government would continue to discuss with the states.

“For any change to be made you would need the states to agree,” he said.

“This is an issue which is being canvassed in the context of the Tax White Paper process. As I have said before, I do think Australia’s threshold is unfortunately much higher than the rest of the world, and significantly higher than comparable jurisdictions.”

While he wouldn’t comment on Choice’s figures, Mr Frydenberg said: “We’re conscious of compliance-related issues and we’ll continue to work through them in a methodical manner. But with new technology, compliance costs are coming down significantly.”

frank.chung@news.com.au

Josh Frydenberg wants to lower the GST threshold for overseas purchases. Source: News Corp Australia

Choice says books purchased online could be up to 250 per cent more expensive. Source: Supplied

National Retailers Association CEO Trevor Evans has hit out at the “scare campaign”. Source: News Corp Australia