Duty-free comes under renewed pressure in Australia

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The Australian Customs Minister confirmed this week that several government departments are examining the duty-free allowance in the wake of GST (Goods & Services Tax) implemented in July 2000. An inter-departmental committee review considering the reduction of passenger and crew duty-free concessions was set up earlier this year.

Local press reports have indicated that Customs is seeking to abolish the A$400 limit because of costs associated with monitoring. GST is charged on goods brought into the country that exceed the A$400 limit. There is also a A$50 waiver: that is, Customs will not charge duty on goods valued at under A$400 if the amount they collect is less than A$50. With GST tax rates at 10%, this effectively means it is possible to bring in up to an additional A$500 of goods (less if its alcohol or tobacco which attract a higher tax). It is this waiver system that allows travellers to bring in 2 or 3 litres of alcohol when the limit is technically only 1 bottle. The government argument is that the value of the waiver obviously increased when higher sales taxes were replaced with lower GST.

There have also been reports of some government departments wanting to scrap duty-free altogether, and others wanting to scrap duty-free tobacco and possibly wines and spirits. In May a proposal to ban duty-free tobacco sales was removed at the last minute from the government's budget proposals after lobbying from airports and operators such as The Nuance Group (TRW 24/5/01). Other departments are seeking to close a clothing loop-hole. Clothing is currently exempt from the A$400 limit because under the old system, there was no sales tax on clothing; but now there is a 10% GST. The exemption potentially represents a bottomless loss of tax revenue on clothing for the Government.

The review process has not been terribly transparent. Submissions by airports and operators were made in December last year and to date there has been no draft report published.