In November this year, the Federal Government introduced a new $5.8 billion retail tax in the Northern Territory.
This was the first state and territory retail tax, and was designed to address the negative impact that state and territories have had on the Australian economy.
However, there were many challenges to this policy.
The retail tax did not include the levy that was set to be introduced by the Government of Western Australia (GWA), and it did not provide any additional support to the industry.
In April 2018, the GWA announced that it was discontinuing its planned GST increase, which had been the main pillar of its tax policy.
It also announced that its GST increases would be phased out over four years, in line with the Federal Parliament’s policy to phase out the GST over two years, starting in 2019.
The Government’s announcement on April 18 was also accompanied by a significant reduction in the number of states and territories participating in the GST, which resulted in many retailers exiting the market.
Some retailers, including Costco, were forced to cut back their retail activities.
The Australian Competition and Consumer Commission reported that “many Australian retailers have been forced to reduce their operations, including by closing shops, reducing hours of business, and laying off staff”.
In response to this, the Government announced a reduction in GST from 14.5% to 12% in July 2018.
This is the first phase of the new retail tax.
On January 15, 2019, the Australian Government announced that the GST rate would return to 12%.
However, a number of businesses and retailers, which did not initially expect a return to the old 12% GST rate, are now anticipating that it will return to 14.9% in 2020.
While the rate of return on the GST has been a topic of debate for some time, it has only just begun to gain some traction.
In January 2018, a poll conducted by the Australian Bureau of Statistics found that 63% of Australians support a return of the GST to 12%, with only 17% opposing the change.
Although there has been significant support for a return, there are also concerns about the impact of the change on the economy.
While the change will help to increase demand for goods, the introduction of the tax could lead to a spike in the price of those goods.
There are some signs that the economy may not be as healthy as many expected.
On January 22, the National Audit Office released a report entitled “State and Territory Economic Impacts of GST Reform” which found that, “While some aspects of the policy are expected to provide additional revenue for state and local governments, there is a concern that the impact on the general economy could be significant.”
The report also noted that, in a number, the impacts of the reform could be “particularly significant in the tourism sector”.
Although the changes to the GST are expected have a positive impact on consumers and businesses, there remains much work to be done to ensure that they are also a success for the economy and the public good.
More to come…