Boycott the retailers pushing for GST on online overseas purchases

Store Wars - picture from news.com.auRetailers 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

(8) Retail war on online GST sales grows

(9) Customs must move to combat cheap online import fraud

7 thoughts on “Boycott the retailers pushing for GST on online overseas purchases

  1. Rick

    I will avoid these retailers wherever possible and particularly any associated with Gerry Harvey and Solomon Lew.

    See also and the politics of guilt, http://www.couriermail.com.au/ipad/time-to-lay-off-the-guilt-trip-gerry/story-fn6ck620-1225984224384

    The tyranny of distance is meaningless on the net as consumers smart up with smartphones that will only increase the problems for the dinosaurs.

    The article above above also flags the significant debt stores have placed consumers under. Affordable commodities should be sought by all.

    We cannot be a global player and then complain when consumers are held captive to local economic tariff walls.

  2. Jack Chomley

    Not to mention, the horrible service by street retail businesses in Australia, going shopping in most retail stores is sometimes like entering a war zone.
    Front counter employees who give the impression they hate their jobs, how sad.
    You want to order something that is out of stock??? Forget it, tell someone who cares, because most don’t………
    Gerry and Co, get pro, or go home……

    Jack Chomley

  3. Lynne

    It might be a good thing if the Just Group were forced to lay off workers, since they have been linked to sweatshops operating both in Australia and abroad. I’m sure that the sweatshop workers would be able to pick up employment elsewhere and enjoy benefits available to other Australian workers, i.e., decent pay, decent hours and decent working conditions.

  4. Albert

    I disagree with your article,competion is great but there should be a level playing field.How would it be if you had a store and charged gst and the store next door was gst free. If the goverment refuses to collect the gst under $1000, then retailers in australia should do the the same then iam sure the consumers would not complain.

  5. Post author

    The GST isn’t even the issue, even if you added GST to the overseas purchases they are still 20-80% cheaper including delivery costs. To suggest removing GST for sales under $1000 in Australia is ridiculous and totally unworkable and would leave a massive hole in the budget and collecting GST on amounts under $1000 being imported by individuals does not make sense as it costs more to collect then it returns.

    There is no such thing as a level playing field, you have larger stores that have much better purchasing power then smaller stores, they pay less rent and have more favourable terms with suppliers. There is a much wider variety overseas compared to what we have in Australia and this is more to do with our smaller market and there are so many other issues such as rent, wage costs and so on that make retailing not competitive.

    You have a few companies like Westfield controlling the majority of the large shopping centres which drives the prices up and this is further exacerbated with leases that allow them to inspect the books of their smaller tenants and charge them more rent if they make too much money.

    Postage costs thanks to Australia Post are another area where there are issues, it’s cheaper to have something posted from overseas then it is to send it inside Australia.

    So charging GST on imports below $1000 will do nothing to sort out the problems in this country with retailers who have been selling rubbish at high prices, in particular the chain stores like Myers, David Jones and so on. Now that consumers have some choices they are finding more and more that there are better and cheaper places to shop both in Australia and overseas.

    The part that really blows away your objection is that only a few percent of all retail sales are made via the internet and half of these are made inside Australia. Retailers, importers, distributors are all part of the problem and it’s inefficiency and sloppiness that is causing their demise not people purchasing goods over the internet.

  6. Ned

    Most computers/electrical good are sold at 10% margins in Australia – the 10% GST is the difference between being profitable and going broke.
    Of course it would be fairer to Australian businesses if the GST was to apply to all imported good – 10% margins ARE important.
    Most comments and the artice are self serving and quite childish – understand some economics before you do the me me me comments.
    Australia is very small and our local jobs and suppliers need some protection.

    The GST on imports is simply a no brainer. Anyone arguing against it is simply an uneducated and selfish person with no long term view.

  7. Post author

    Thanks Ned but you missed the point entirely.
    1) It will cost more to collect the GST on imported goods under $1000 then it will raise, clearly this makes no sense and someone with your intelligence can clearly see this is not viable.
    2) Imported goods are often 20-80% cheaper even when GST is factored in so charging GST will not stop people from importing goods direct as the goods will STILL be cheaper. What this has to do with 10% margins is beyond me but you are confused as to what is occurring here.
    3) Most computers and electrical goods from places like Harvey Norman have a much bigger margin then 10%, more like 50%.
    4) GST already applies to all imports EXCEPT personal imports under $1000.
    5) Less then 2% of retail spending is spent overseas, that’s right less then 2%.

Leave a Reply