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Consumers save millions online

Australian consumers are saving more than half a billion dollars in GST by online purchases from overseas.

The Australian Bureau of Statistics (ABS) estimates that the value of goods imported under the Low Value Threshold (LVT) – currently $1,000 – at $6,226 million, up 15.8% compared to last year. Although the ABS notes that it doesn’t have any reliable means of tracking this information, but does admit that a large number of parcels were coming into the country under the LVT.

It also means the government is missing out on a cool $560 million in annual tax revenue, although the government has repeatedly stated that the cost to lower the LVT would outweigh the benefits.

The new estimates will likely raise the ire of local retailers, who have long called for the government to lower the tax-free threshold. Gerry Harvey, of Harvey Norman Holdings (ASX:HVN), last year stated that he had given up protesting, because he couldn’t see the government taking any action.

Premier Investments’ (ASX:PMV) chairman Solomon Lew said in December last year that there was overwhelming evidence of the damage it had done to the local economy, and warned that it was putting Australian companies and jobs at risk. “My message to the government is that we have all run out of time”, said Mr Lew. “In every other comparable country, governments have recognised the need to deal with this as a serious matter of public policy and have already acted, while our government plays ‘process games’.”

In June this year, large retailers joined forces to kick off a campaign by the Australian National Retailers Association (ANRA). It included Coles and Bunnings – both owned by Wesfarmers Limited (ASX:WES) – as well as Woolworths Limited (ASX:WOW) and Harvey Norman.

ANRA estimates that it would raise the government $1 billion a year, while costing $100 million to implement, and cost $34 million annually in operating costs.

Foolish takeaway

Until the government takes steps to reduce the threshold, the issue is unlikely to die. Coming up to an election, we could see retailers raise the issue again.

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

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