VoxGroup Newsletter – Consulting – 12th August 2022

Home » VoxGroup Newsletter – Consulting – 12th August 2022

Import Tariffs:

An interesting article we thought to provide to our clients on the state of import duties and the investigations currently underway.

As reported in The Sydney Morning Herald of August 5th, Productivity Commission research that puts pressure on the federal government to consider axing all remaining tariffs found the broad economic cost of collecting $1 in tariffs is likely to climb from between 57¢ and $1.59 today to almost $5.

The federal government collects about $1.5 billion in tariff revenue a year, or less than 0.3 per cent of its total tax take.

Compliance costs for businesses interacting with the system, including through the use of freetrade agreements to avoid tariffs, were expected to be up to $2.2 billion a year. Those costs, in large part borne by shareholders and workers, would grow as more trade deals were signed.

‘‘ The costs associated with tariffs will considerably exceed the revenue collected as new preferential trade agreements are agreed,’’ the research found. ‘‘ This report argues that Australia’s tariff system does not produce large distortions to production and consumption but does entail high (and increasing ) compliance costs for businesses, which add to the costs of goods and services.

‘‘ Part of the compliance costs are passed on to consumers; others increase the costs of Australian exports . Yet other adjustments can occur through pressure on returns to shareholders and on wages.’’

Trade agreements already in place, plus changes in government policy over the past half-century , mean about 90 per cent of imported goods come into Australia tariff free . The remaining tariffs hit just 10 per cent of products, mostly on knitted cloth, car parts and furniture.

Tariff revenue is expected to fall further as Australia signs trade deals with Britain, India and the European Union in the coming years. The trade deal with Britain is expected to cut tariff revenues by between $106 million and $134 million . A deal with the EU would cut revenues by between $704 million and $774 million.

The commission found businesses importing goods faced significant compliance costs, partly due to the FTAs Australia is party to, as they ‘‘ exert effort’ ’ to access preferential or concessional rates of customs duty. That effort can include changing how they make goods to qualify for a particular trade deal.

‘‘ Compliance costs come in two forms: the costs of the ‘paperwork’ needed to demonstrate eligibility for a preference or concession, and the costs of adapting production to make the imports eligible for the preference,’’ it found.

We are continuing to monitor this process however if you have any queries on import duties, compliance or international trade please do not hesitate to contact Rob or Brett in our offices.

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