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Retailers ramp up online GST campaign

Online shoppers could soon face having to pay GST on overseas online purchases, if Australian retailers get their way.

Large retailers have joined forces to have the $1000 GST threshold lowered, as well as highlighting the many benefits the retail sector bring to the economy.

Coles and Bunnings, owned by Wesfarmers Limited (ASX:WES), have joined forces with rival Woolworths Limited (ASX:WOW) and Harvey Norman Holdings (ASX:HVN) to kick off a campaign by the Australian National Retailers Association (ANRA) this week.

The retailers have been alarmed by the rise of attacks on large retailers by regulators, unions and government, and what to highlight the billions of dollars they invest every year in stores, formats, supply chains, staff and technology.

ANRA wants the $1,000 GST-free threshold on international online purchases to be reduced, saying it would raise the government $1 billion a year. A report commissioned by  ANRA concluded that lowering the threshold to $20 would raise $997 million in the first year, after setup costs of $100 million, with operating costs of around $34 million annually.

So far governments have been unable to come up with a way of collecting the tax that costs less than the perceived revenue. ANRA chairman John Gillam wants the federal government to follow the lead of the US, which has enacted legislation that enables states to collect taxes from online sales. Last week, UK retailer Sainsbury urged the UK government to impose similar rules, saying that unfair tax regimes were killing high-street retailers.

Department store retailers David Jones Limited (ASX:DJS) and Myer Holdings (ASX:MYR) have also called for the GST threshold to be lowered, as they not only face threats from online stores but the arrival of several high profile international retailers like Top Shop, Zara and Costco setting up traditional stores in Australia.

Foolish takeaway

The issue refuses to die and retailers are likely to campaign until it is changed. Any reduction in the GST threshold would be a boost to Australia’s retailers, and likely see a re-rating of their share prices.

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Motley Fool writer/analyst Mike King owns shares in Woolworths.

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