Retailers started complaining about the $1000 GST threshold on overseas goods imported by private individuals back in November 2010 and threw around many false and misleading claims to back up their position.
Retailers call for GST on overseas sales
In January the group of retailers grew and they have now launched advertising in the press (with TV to follow) with their false and misleading claims to try and gather support for their push.
“AUSTRALIA’S biggest retailers will launch an advertising campaign aimed at pressuring the government to impose GST on all goods bought over the internet.
Retailers, who will pour millions of dollars into the campaign, have warned that thousands of jobs are at risk if the government fails to act.” (2)
Claim 1: The federal government would reap at least $600 million if it started charging GST on all imports according to Australian Retailers Association chief executive Russell Government, National Retail Association executive director Gary Black questioned this and said it would be more like $20-30 million (1).
Myer chief executive Bernie Brookes estimated the government was forgoing up to $2.5 billion a year in GST and duty on internet sales. “That would build a lot of schools,” he said.
Fact: The federal government has said the cost of collecting the GST on imports under $1000 would exceed the amount raised.
Claim 2: The retailers claim that overseas purchases are to blame for everything from falling sales, staff being sacked right through to global warming.
Fact: In 2009 3% of all purchases were made online ($19-24 billion), of these 50 to 80 precent were on Australian websites leaving .6 to 1.5 percent of purchases being made overseas (3)
The current lack of sales has nothing to do with online purchases but everything to do with higher interest rates, tightening of finance availability, higher utility costs (power, water, rates) and thus less disposable income. This reduction in disposable income combines with retailer greed in wanting to maintain high margins is what is hurting retailers in the short term.
Claim 3: Harvey Norman and Myer both have promised to setup online stores in China to ship goods direct under $1000 with no GST in order to compete with the overseas online retailers.
“Myer is working on an international retailing website that will sell goods to Australian customers, shipping them from a warehouse in Shenzhen in southern China to avoid the GST and make Myer more competitive.” (4)
“Harvey Norman chief Gerry Harvey said his company’s site will be in place possibly before Myer’s, as traditional retailers struggle to compete against a tide of inexpensive merchandise bought online and imported directly by consumers.” (5)
Fact: They won’t setup these online stores, both Harvey Norman and Myer take years to make any changes to their business and any savings on removing GST from the sale would be eaten up by shipping. The issue isn’t just the GST but rather the excessive markups that both companies have on their products. Many products are under half the price including shipping from overseas so adding GST doesn’t mean you will stop people from shopping overseas but it will turn people against these retailers. The constant press coverage will only have people checking online to see what prices are like and drive more people to shop overseas.
The problems as I see it with Australian retailing are
- Retailers are stuck back in the 1980′s, look at any Myers, Harvey Norman or David Jones store to see that nothing has changed in 30 years and to top it off these companies have a weak online presence. Cutting the number of suppliers and items that you stock to a few select high profit brands is hardly a way to increase sales, consumers want a choice and with more doing research online it’s not acceptable to offer only a few alternatives.
- The online stores if they do have one have a very limited range of stock, there are no live stock displays nor information on where the products can be viewed. The prices are the same as in store and generally not far from the retail price. There are many online stores in Australia that are 20-30% cheaper on electronic products.
- Price match guarantees are useless if you won’t sell below your inflated floor cost and set dozens of conditions, why would you waste your time when you can purchase it cheaper elsewhere including from an online retailer (both in Australia and overseas).
- Goods overseas are substantially cheaper then the same goods in Australia, part of the difference is our tax system, part is our higher wages but a substantial amount is the higher profits and poor business practices of retailers in Australia.
- The retailers involved in the push for GST on online overseas purchases are the same ones who have created many problems with retailing in Australia including the wiping out of local production through purchasing cheap garments and other products from Asian countries and retailing at the prices Australian made garments were sold for. The retailers were happy to make massive profits without passing on any savings to customers and the same applies when our dollar which has appreciated 25% over the last 12 months is taken into account. (6)
- The benefits that online shoppers are benefiting from at present also benefit the importers and retailers, whilst there is a delay for the importers and retailers in getting the benefits of our strong Australian dollar they still receive the benefits.
- Australian retailers are just plain boring, their idea of innovation is a variation of interest free and yet another % off sale. They need to wake up and take a look at what retailers are doing around the world.
The Greens support the push with their leader Bob Brown saying
“GST on imported goods is a reasonable thing,” he told reporters in Hobart on Tuesday.
“Why should the shop up the street have to charge GST for its customers but the shop selling goods out of Tokyo or California not have to charge GST?” (7)
Those stores are not based in Australia and as such our tax laws do not apply and second of all the tax would be collected at the point of entry to Australia like it is now. You would think the leader of the Greens would actually understand something about how the GST operates and even the small fact that the cost of collection of the GST on private imports under $1000 is not viable before supporting the retailers in their absurd claim.
The National Retailer Association (8) has joined the campaign representing 3700 small shops and has come out with absurd comments like
“The Australian community will pay an escalating price for the failure to address this blatant inequity,” the association’s director Gary Black said in a statement today.
“This price will result from GST lost, from duties and tariffs foregone, from customs fees and charges foregone.
“From job losses, payroll tax revenue reductions, and the cost to the economy of inevitable business failures.”
A previous statement (9) from the NRA has seen claims of this being the biggest threat to bricks and mortar stores in decades, that there is rampent fraud occurirng, suggestions of mandatory charges for all imports to cover the cost of enforcement and so on. Read the statement here.
The retailers involved in the push for GST on online overseas purchases are
- Angus & Robertson
- Borders
- David Jones
- Dotti*
- French Connection
- Harvey Norman
- House
- Jacqui.E*
- JayJays*
- Just Jeans*
- Mimco
- Myer
- Nine West
- Peter Alexander*
- Portmans*
- Seed
- Smiggle*
- Steve Madden
- SuperChef Warehouse
- Target
- Witchery
- National Retailers Association members (3700), it seems that the various associations want to keep their members identities a secret.
* All part of the same company – The Just Group
I’ll be avoiding all of these retailers wherever I can even if that means paying more to another retailer. If enough people did boycott these retailers they would either change their business model or go bust, either way it would be a good thing for Australian consumers.
(1) Retailers call for GST on overseas sales
(2) Online sales will kill jobs: retailers
(3) No GST change to curb online shopping
(4) GST pushes Myer online to China
(5) Harvey Norman plans to match Myer’s internet move
(6) Blanket online GST an administrative nightmare, says Nick Xenophon
(7) Greens back online shopping GST call