The government can’t miss this business opportunity
Rarely do governments have an opportunity to close a tax loophole and keep people happy at the same time. They’re almost as rare as chicken’s teeth.
That’s why when business groups come together to argue for a change to the tax system, which will raise more revenue, a smart government ought to seize the opportunity.
In recent weeks we’ve heard an emerging chorus of business leaders call on the Gillard Government to close a growing tax loophole which allows foreign online retailers to avoid collecting the GST when selling goods worth less than $1000 over the Internet.
Against a backdrop of declining state government balance sheets, state Treasurers have also come out in support of this reform. As a matter of fact, they just met to talk about changes to the tax system.
And there are some very strong, compelling arguments why the Gillard Government must force foreign online retail giants like Amazon, eBay and Macy’s to collect the same GST and duties that locals are obliged to collect.
1. According to the Gillard Government’s own GST review, it stands to recoup an estimated $4.2 billion in tax revenue by making foreign online retailers play by the same rules as everyone else.
The Gillard Government and its state counterparts are currently having a tough time finding the money needed to get their budgets in order and fund the services most people expect – services like education, health and law and order.
Federal Treasurer Wayne Swan is currently staring down a $43.7 billion hole in his budget bottom line and his state colleagues face similar fiscal challenges.
2. A tax free zone for foreign online retailers is bad news for Aussie businesses and jobs.
Ask almost any industry commentator and they will tell you that online is a big part of the future of retail.
And Australian retailers agree. That’s why they are investing heavily in online platforms to meet the changing demands of customers.
Companies like David Jones, Myer and others have invested more than $600 million in making it easier to shop with them on the net.
But the reality is, when the Gillard Government’s tax system creates an effective tax free zone for foreign online retailers, it undermines the ability of Australian companies to compete.
The Australian retail industry is currently one of the country’s largest employers, supporting the jobs of more than one million Australians.
But there is little hope of that being sustained if foreign online retailers continue to get a free ride.
In fact a report by Ernst and Young, which was commissioned by the National Retail Association earlier this year, found that a failure to address the tax imbalance between local retailers and their foreign online counterparts could cost the sector 33,400 jobs by 2015.
It’s been one of the great myths of this debate that this is an argument between bricks-and-mortar retail and the new online, a sort of high stakes battle between the past and the future.
This is not true. Regardless of whether a retailer is of the traditional variety or online, or a combination of both, so long as they are based in Australia they are at a competitive disadvantage compared to companies based on foreign shores.
It’s particularly soul destroying for the thousands of small Australian retailers and innovators out there who want to make a go of it selling their wares on the web. Our tax system is stacked against them in favour of foreign, online giants. And that ought to be corrected.
3. Many Australian businesses feel they’ve had a rough trot with the Gillard Government.
Some complain bitterly that changing government regulations have tied their businesses in knots, making it harder to turn a profit and to employ more people.
Here the Gillard Government has an opportunity to build some goodwill and help businesses do what they do best: create economic opportunities and jobs.
All it would take is a small but meaningful change to the tax system.
4. Unlike past battles over tax, this time business is on the government’s side.
The Gillard Government can rest assured that this debate won’t be like the row over its mining or carbon taxes.
Those were debates where businesses had some serious and legitimate concerns and every right to make their voices heard.
In this tax debate, the Gillard Government has the support of business in delivering change because it makes good business, economic and social sense.
So, let’s draw up a chair to the negotiating table and get this tax problem sorted in the interests of everyone concerned. It’s an opportunity too rare to pass up.
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