Gst Free Threshold
Economics - 101
A recently story by Clancy Yeates from the Courier Mail dated December 3rd 2012, discusses groundwork laid out by the Australian Federal Government. The government aims to reduce the thousand dollar GST free threshold for goods bought from overseas online stores. The article refers to the assistant Treasurer David Bradbury and how he feels the policy will affect on retailers. Bradbury states “while this is not the biggest challenge confronting the retail sector, the government does recognise that on the basis of fairness and tax neutrality Australian retailers should not be disadvantaged by taxation arrangements which favour overseas retailers”. Bradbury also states “the government also acknowledges that the current threshold of $1000 at which GST is collected on low value parcels is very high by international standards”. Currently, it is one of the highest thresholds in the world.
A landmark review by the productivity commissions last year gave “in-principle” support for cutting the threshold but found it did not yet make economic sense. Economically, this has many effects and can be broken down into three major areas: tariffs, deadweight loss, and gross domestic profit (GDP).
As a workforce becomes more educated and its technology more expansive, labour costs will increase. Due to this, the world price for goods and services sold in Australia is lower due to these labour costs. With technology advancements these goods and services have become more attainable to the Australian public. Thus forcing Australian producers and retailers out of the market due to the world price being lower than the Australian equilibrium. By decreasing the GST free threshold, the government protects local producers by placing a tariff on imported goods. A tariff is a tax imposed by the government on imported goods.
Such a tax (tariff) has the effect of raising the price of imported goods making it easier for domestic produced goods to
A recently story by Clancy Yeates from the Courier Mail dated December 3rd 2012, discusses groundwork laid out by the Australian Federal Government. The government aims to reduce the thousand dollar GST free threshold for goods bought from overseas online stores. The article refers to the assistant Treasurer David Bradbury and how he feels the policy will affect on retailers. Bradbury states “while this is not the biggest challenge confronting the retail sector, the government does recognise that on the basis of fairness and tax neutrality Australian retailers should not be disadvantaged by taxation arrangements which favour overseas retailers”. Bradbury also states “the government also acknowledges that the current threshold of $1000 at which GST is collected on low value parcels is very high by international standards”. Currently, it is one of the highest thresholds in the world.
A landmark review by the productivity commissions last year gave “in-principle” support for cutting the threshold but found it did not yet make economic sense. Economically, this has many effects and can be broken down into three major areas: tariffs, deadweight loss, and gross domestic profit (GDP).
As a workforce becomes more educated and its technology more expansive, labour costs will increase. Due to this, the world price for goods and services sold in Australia is lower due to these labour costs. With technology advancements these goods and services have become more attainable to the Australian public. Thus forcing Australian producers and retailers out of the market due to the world price being lower than the Australian equilibrium. By decreasing the GST free threshold, the government protects local producers by placing a tariff on imported goods. A tariff is a tax imposed by the government on imported goods.
Such a tax (tariff) has the effect of raising the price of imported goods making it easier for domestic produced goods to
References: * Peter Whoriskey and Anne Kornblut, Washington Post Staff Writers, Saturday, September 12, 2009 http://www.washingtonpost.com/wp-dyn/content/article/2009/09/11/AR2009091103957.html * The Courier, Cut in GST-free threshold eyed Save, By Clancy Yeates, Dec. 3, 2012, 3:25 p.m. * Trade, protectionism, and the U.S Economy; Examining the Evidence, Krol, 2008 http://www.cato.org/pubs/tbp/tbp-028.pdf