Impact of removing the LVT on GST revenues
Friday, 14 September 2012 - An EY report commissioned by the National Retail Association Ltd has quantified the significant and growing loss of GST revenues to the States and Territories resulting from the Low Value Threshold (LVT).
Total GST receipts forgone have been estimated to amount to $2.49 billion over the three years from 2012/13 to 2014/15 (excluding customs duties and other charges). After allowing for ‘general’ Australian Taxation Office administrative costs, $2.45 billion in GST receipts are forgone to State and Territory Governments with the continuation of the LVT.
The revenues foregone exclude parcel collection costs, the ultimate cost of which is difficult to estimate. However, there is growing evidence (as summarised in the Low Value Processing Taskforce Report 2012) of the use of a streamlined approach for handling and administering low value goods.
In addition to lost GST revenue collections, there are broader economic and industry implications from continuing with the LVT, including:
- Reductions in GDP from reduced domestic retail purchases which would have consequent impacts on Commonwealth and State Government tax bases (e.g. income tax, GST and payroll tax)
- Reductions in employment which would create public costs with regards to social welfare and other government services (e.g. concessions and subsidies).
Previous work undertaken by EY commissioned by the National Retail Association The threshold question: Economic impact of the low value threshold on the retail industry which assessed the economic impact of online retailing on Australia found that up to 118,700 traditional retail jobs would be lost by 2015, including up to 33,400 as a direct result of the Low Value Threshold (LVT). The firm’s modelling also showed that the continuation of the LVT would result in the shrinking of GDP by up to $6.5 billion by 2015.
For the full report (pdf, 182.4kb)
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