Online tax to recover lost GST

FIRST ON 7: Secret Treasury documents reveal plans to introduce a new tax for online shopping.

Online tax to recover lost GST

Online tax to recover lost GST

It's one of several proposals the Government is considering in the hopes of reclaiming more than a billion dollars in lost GST.

Retail stores continue to struggle outside of the annual Christmas shopping spree, with sales sluggish throughout 2012. The outlook is much brighter online, where business is booming.

Australia Post report they have seen an 11% increase in parcels handled this Christmas, largely thanks to shoppers purchasing goods online, often from overseas sellers.

Doing away with bricks-and-mortar shop fronts is one reason online retailers are able to offer such competitive prices, but there is another explanation: shoppers are not required to pay tax on purchases of less than $1,000.

Treasury documents show the tax loophole is costing the Commonwealth some $1.5 billion dollars in lost revenue. And it's foreign companies taking advantage, having gobbled up 40% of the online shopping market share.

The government has investigated introducing a GST for all online shopping, but treasury documents show imposing the tax would be close to impossible and would cost far more to administer than it would ever pull in.

Based on current sales, an online shopping GST would generate $600 million, but cost well over $2 billion dollars.

Instead, the tax office hatched a plan for a flat 10% tax when Australian dollars are changed into foreign currency, such as in an online international purchase.