STATE Treasurer Kim Wells has backed plans to impose GST on online foreign purchases after a new report found such a move could boost Victoria's bottom line by more than $500 million over three years.
The report, by Ernst & Young, estimates scrapping the so-called low-value threshold - where goods bought online worth less than $1000 escape the GST - would raise $564 million over the next three years for Victoria.
Mr Wells said Victoria had been saddled with a large cut in GST funding at a time when the Commonwealth was expecting it to deliver more services.
''The Commonwealth should reconsider the revision of the low-value threshold if a cost-effective method for collecting the payments can be made and the overall benefit to Australian consumers and businesses justifies it,'' Mr Wells said.
Local retailers argue they are at a serious disadvantage, warning of widespread job losses and ongoing business closures triggered by cut-price online competition.
Ernst & Young has concluded that 118,000 traditional retail jobs will be lost in Australia by 2015 because of the switch to online retailing - representing the demise of one in 11 traditional retail jobs. It said most of those job losses would be in typical non-food sectors, such as department stores, electronic shops and clothes stores.
The report, commissioned by the National Retail Association, said foreign retailers enjoyed an average 14 per cent price advantage over their Australian competitors, who pay GST and customs charges.
''These price distortions ultimately create inefficient patterns of consumption, production, investment and resource use in Australian retail,'' the report said.
Association executive director Gary Black said the GST inequity was increasingly harming the state economy at a time when it was confronting tight budgetary conditions.
''This is a double blow for Victoria because the low-value threshold also poses the greatest threat to traditional retail jobs and domestic online retail growth,'' Mr Black said.
The push follows Bureau of Statistics figures showing almost 24,000 traditional retail jobs were lost nationally over the year to May. Local retailers complain that the $1000 threshold is highly inequitable, with the threshold in Britain as low as £15.
New South Wales Treasurer Mike Baird has also urged the Commonwealth to cut the GST threshold on online goods from $1000 to $30. But part of the problem is that collection costs - requiring monitoring of almost every parcel - are seen as prohibitively high. Federal Treasury's Low-Value Parcel Processing Taskforce has concluded there is a good theoretical case for levelling the playing field, but it is not straightforward, with the cost of revenue collection potentially outweighing the benefits of a lower threshold.
It said the number of parcels in international mail had more than doubled over the four years to 2010-11 to more than 48 million.