No. 53

A GST-FREE CHRISTMAS

Stone the crows! Retailers want import taxes for Christmas!

Last week retailer Gerry Harvey said the strong Australian dollar made internet shopping cheaper than buying locally and the government should so do something about it.  The something he had in mind was levying GST on people buying online from overseas. [i]

Rag trade mogul Solomon Lew extended the argument, saying small retailers were picking up stock offshore and ducking import duty by keeping their purchases beneath the $1000 customs threshold. [ii].

These were arguments that attracted Assistant Treasurer Bill Shorten, albeit not for long.  After acknowledging he understood the retailers’ pain he quickly followed up with an undertaking to leave private purchases GST free.[iii] Even so, the case for industry assistance is on the agenda.

Now where have we heard these arguments before? Try every year since the protectionist – free trade fights before Federation and the dark decades of the twentieth century when the Australian response to products made better and cheaper overseas was to tax them out of the market. And try the debate over imported CDs (how did anybody get the damn things into their IPods?) and last year’s successful campaign by Australian printers and publishers to restrict access to low cost overseas editions.

Certainly the retailers have a point. Imports worth under $1000 jumped by 17 per cent in the last financial year – to $7.7 million plus customs clearances-compared to a 5 per cent increase for larger value shipments. And with the sort of effort only a tax bureaucrat would ever welcome it would be possible to set up a sales tax system on imports. [iv]

Amazon collects sales tax for some US states and perhaps it could do the same for sales here – although how it would fit with our global free trading credentials confounds the Crows. [v]

But advocates of globalising the GST should get a grip.  For a start only 12 per cent of purchases of online sales and services are from overseas. [vi]

More important, suggesting a sales tax will save Australian retailers from online competition misses the point. Even with the strong dollar, there are two other very big reasons why people shop offshore – range and service.

Their importance came to the crows on the weekend when US gent’s outfitter the Messrs Brooks Brothers emailed him news of a Thanksgiving sale. Their suits and shirts are well priced and having bought from the firm before the Crows know the quality is okay.

More important, because the Crows are an odd shape, (you try getting a double-breasted grey suit that accommodates wings) buying anything but bespoke locally is a problem. However, the brothers Brooks offer an enormous range of fractional-fits, which, well, fit.

But, before pushing “pay” on an email order, the Crows thought they should do the patriotic thing and have a look at what was on offer in Sydney mall land.

Which was not much. Certainly, there were many suits on sale, but in three out of four retailers, the customer service was cursory and in the other one it was overly enthusiastic, with a sales person determined to sell a garment, which was expensive and ill fitting. That a well-designed website provided better customer service than people on shop floors says a great deal about Australia’s retail culture.

And so the Crows went where the value and service was – cyber space.

There is a lot of this about and retailers in all sorts of industries who have long relied on tariffs and the tyranny of distance are in trouble because of it. The online market is expanding fast. According to consultants Frost and Sullivan online retail spending will grow 8.5 per cent this year to $12 billion, with 40 per cent of sales going offshore.[vii]

Nor is this increase just driven by the strong dollar. According to an ACMA survey 69 per cent of people buying on-line from overseas nominate variety and availability as their reason why, with just 41 per cent saying they are buy just on price. [viii]

And if anybody wants to argue that we are not in a retail revolution, which involves much more than comparative price points, or physical availability, go looking for a retail record store. Or ask your friends who are buying e-books for their Kindle or equivalent to read over Christmas.

By June, this year Amazon was selling 180 e-books for every 100 hardcovers.[ix] As The Australian editorialises, retailers who think, “consumers can’t make a decision without holding a product needs to ask where the record store that used to be next door has gone.[x]

And even a GST on e-books and music, or physical goods shipped from overseas, will not bring them back into business. Or save retailers who will not accept that we are living less in a global village than a worldwide mega-mall.

Endnotes


[i] Teresa Oi, “Internet shoppers denting our profits: Harvey”, The Australian, November 24

[ii] Blair Speedy, “Solly Lew adds voice to taxing online spending,” The Weekend Australian, November 27

[iii] AAP “Shorten backpedals on online tax”, Sydney Morning Herald, November 24

[iv] John Kehoe, Carrie LaFrenz and Emma Connors, “Retailers feel import squeeze”, Australian Financial Review, November 27

[v] “Amazon faces sales tax attack” Business Day,  May 4 2010, @www.stuff.co.nz recovered on November 27

[vi] Australian Communications and Media Authority, “Australia in the digital economy: consumer engagement in e-commerce” (November 2010), 20

[vii] Patrick Stafford, “Online spending to hit $12 billion in 2010” Smart Company, July 19  @ www.smartcompany.com.au recovered on November 27

[viii] ACMA op cit 21

[ix] Catherine Neilan “Amazon sells more Kindle books than hardback” The bookseller, July 20 @ www.thebookseller.com/news recovered on November 24

[x] “Cyberspace is shopping heaven” The Weekend Australian, November 6

'2012