Removal of ‘nuisance’ import tariffs: Who benefits?

These nuisance tariffs – which include taxes on such items as toothbrushes, sanitary products, bamboo chopsticks, dishwashers, protective footwear and more – caused a major administrative burden for businesses and government. Yet they offered little in terms of productivity, protection, performance or financial gain.

The reforms aim to simplify Australian trade and help small business by slashing red tape. Removing the tariffs streamlines an estimated $8.5 billion of annual trade, or 14% of Australia’s total tariffs. However, despite representing a sizeable percentage of the number of tariffs, they were collectively worth just $11 million to $20 million annually.

Has Australia lost revenue?

What were these tariffs worth individually in terms of revenue? Not a lot, a report concluded from The Treasury:

• Fridge freezers with annual imports worth over $668 million raise less than $28,000 in revenue per year.
• Tyres for agricultural vehicles, tractors or other machines with annual imports worth over $102 million raise less than $10,000 in revenue per year.
• Protective footwear with annual imports worth $160 million raise less than $112,000 in revenue per year.
• Toothbrushes with annual imports worth over $84 million raise less than $22,000 in revenue per year.
• Menstrual and sanitary products with over $211 million worth of annual imports raise less than $3 million in revenue per year.

“By abolishing hundreds of import tariffs, we’ll reduce red tape, boost productivity, ease the burden on small businesses and help to cut the cost of doing business,” says Treasurer, Jim Chalmers.

“This is meaningful economic reform that will deliver meaningful benefits to businesses of all sizes around Australia.”

The axing of the tariffs should provide “a small amount of extra help with the cost-of-living challenge”, Chalmers says.

Most goods previously subjected to the tariffs should now see a small drop in price in the market. At the same time, the changes will make doing business easier, with less compliance responsibilities.

Other Ministers suggested the reform will positively reverberate across the national economy.

“Trade that is simple, fast and cost effective can boost Australia’s international competitiveness, help create jobs and reduce cost of living pressures,” says Minister for Trade and Tourism Don Farrell.

Minister for Agriculture, Fisheries and Forestry and Minister for Emergency Management, Senator Murray Watt believes that scrapping the tariffs will benefit farmers and consumers alike.

But is it?

Tariff cuts: The industry angle

CEO of the Australian Retail Association (ARA), Paul Zahra, says that while every little bit helps in terms of reducing cost of business – including direct financial costs and the cost of compliance and administration – there is more work to do.

“We are pleased to see some initiatives aimed at business,” Zahra says. “The ARA has been a strong advocate for reduced import levies and reduced red tape for business.”

“Whilst this tariff reduction will provide only modest cost relief for retailers, the simplified system will eventually have a flow on benefit to business productivity – a critical issue this year whilst retailers aim to get back on their feet.”

Interest rate pressures in particular are putting the brakes on spending, Zahra says. Therefore, cuts to nuisance tariffs, while welcome, may not be the panacea the economy so urgently requires right now.

“The cost of doing business remains at an all-time high for retailers – from energy, leasing and wages costs to continued supply chain pressures,” he says.

The ARA suggests more powerful change, including:

• The appointment of a National Supply Chain Commissioner;
• Increased investment in recycling infrastructure to improve supply chain resilience;
• A Payroll Tax Taskforce to better align states and territories; and
• Small business boosters such as tax deductions and an extension of the small business energy rebate.

There were pockets of other relief for small business in the budget, including:

• An extension of the $20,000 instant asset write-off for another 12 months;
• $23.3 million dedicated to encouraging eInvoicing adoption, potentially improving payment times and cashflow; and
• Energy rebates of $325 to around one million small businesses.

In this context, the removal of nuisance tariffs is a positive step.

“The Productivity Commission has estimated the cost of nuisance tariffs to be between 59c to $1.57 per dollar of revenue raised. This makes them an extremely inefficient form of taxation and industry policy,” says Innes Willox, Chief Executive of the Ai (Australian Industry) Group.

“The Treasurer’s decision to abolish around 500 so-called 'nuisance tariffs' is the kind of economic reform Australia needs.”

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