To GST or not to GST

6/01/2011

Comments: 17 readers have left a comment

The campaign by major retailers calling for the GST to be applied to items bought overseas for less than $1000, is evidence that the long promised “online shopping revolution” has arrived.

Or is it?

Presently the GST is applied to (almost, thanks Meg Lees) all domestically bought goods and services but is only applied to online purchases of more than $1000.

This has prompted a coalition of large retailers, including Myer, Harvey Norman and David Jones to take out newspaper adverts claiming the situation is unfair and threatening their profitability and Australian jobs.

On the face of it, the present situation does appear to be unfair.

Australian retailers have to pay GST on goods worth less than $1000, their overseas online competitors do not.

Different rules for different retailers based solely on the country in which they operate.

It is important, however, to ask why this is the case.

Simply put, the cost of collecting, administering and enforcing a lower threshold for GST on overseas purchases would likely cost more than the revenue collected.

If it ends up costing the Federal Government money to protect local retailers, the proposition starts to look less attractive.

The idea that applying the GST to online purchases would change consumer behaviour and bring them back to brick and mortar stores is also questionable.

Many items are up to 50 per cent cheaper when bought overseas compared Australian retailers and the application of the GST would still leave them significantly cheaper than in Australian stores.

For example, a Nikon d5000 camera with twin lenses costs $1499 from Harvey Norman, compared to $900 (with free shipping) from King Trade Cameras in Hong Kong through eBay.

Even after applying the GST, this still leads to a saving of over $500, or 30 per cent.

Secondly, it is worth considering that only about three per cent of retail sales were made online last year and of that, at least half went through Australian websites, which pay the GST.

Australian retailer’s portion of online sales could be increased if they were more proactive about selling online.

Harvey Norman doesn’t sell anything on its website and David Jones only started offering online sales in November.

My suspicion is that if Australian retailers started seeing the internet as an opportunity rather than a threat, they might have more success.

Another interesting example of price differentiation between Australia and the rest of the world is the pricing of the recently released Beatles catalogue on iTunes.

iTunes Australia sells each song at $AU2.19, including GST, compared with $US1.29 in America, despite the Australian Dollar trading at parity with its US counterpart.

So even when GST is applied to goods bought online, and there is zero distribution costs, it seems Australian consumers still have to pay more.

It appears that the old adage, that something is only worth what someone is willing to pay for it, rings especially true for Australian consumers.

What do you think, should the GST be applied to goods bought overseas?

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Reader Comments

Mathak

06/01/2011 at 15:53

Didn't Gerry Harvey proclaimed two years ago that online retailing was “a waste of time"? I guess most of their customers think otherwise.

Kyle Part.1

06/01/2011 at 16:51

No, because (correct me if I am wrong) when a tourist visits Australia, there is an option for a GST refund on goods bought here on their exit from Australia. Many Australian websites (if you can find any) that offer online shopping refund tax to international customers.

Most countries limit the amount a traveler can bring home with them with allowances but how many are doing similar to what is suggested here? To what extent does Australia have the right to close themselves off from offering to the 'Global Internet Market' while still reaping the benefits?

I agree that the local economy should be protected to an extent but I believe it would be better achieved with a yearly monetary allowance of goods bought from overseas rather than enforcing GST.

Kyle Part.2

06/01/2011 at 16:52

Another valid point is the cost of postage and the fact that many stores (DSE for example) price match Australian competitors. I'm sure that many potential customers would happily price match international web-shops and then pay GST on top of that for the ease of customer service and warranty options. If this is about evening the playing field, rather than greed; the above is something Harvey Norman and friends could implement with ease and spin in to win back a bit of respect.

Was there a word limit on this piece? It seems to be a topic that you could write about for hours.

Adrian

06/01/2011 at 18:30

depends how much ity costs to implament. if is more money for the govt, then it should definately apply.

simon

10/01/2011 at 12:37



The facts are clear, we are getting ripped off everyday and these companies don't like the fact we can get what they are selling cheaper elsewhere.
Apple is the perfect example, why are we paying 180 more for an ipad when the dollar is at parity. to ship them here would cost less as we are closer to asia as well.
and the ripoffs are across the board, not just on cheap items. windspire cost in usa $5000 windspire in AU $17000.

The problem we have is that executives want to sit in their air conditioned offices with million dollar views earning million dollar salaries for doing nothing more than signing purchase orders and sticking stock on the show room floor.

greed is the problem, and gerry gibbs has a ton of it!

Haggis

10/01/2011 at 16:38

Yes, we are being ripped off, its difficult to believe the price of certain items in Australia compared with the UK and the USA. Just look at books and cameras alone. Harvey Norman must be making a few hundred dollars on the Nikon D5000 when selling it at $1499, it can be purchased abroad for less than $900. Greed

Gemma

11/01/2011 at 08:46

to all the people complaining about retailers' "greed" and "profit making", isn't that exactly what companies are suposed to do? since when did making a profit become bad? if you have a problem with them making too much profit the answer is easy, buy some shares!

brad

11/01/2011 at 16:49

i agree with kyle, if our retailers put in the work and thought outside the box,they could win back those who have started shopping online.

Mathak

14/01/2011 at 15:40

To Gemma,

Yes you are right, retailers are supposed to be greedy and concentrate on profit making for their shareholders. And no, consumers don't have a problem with them making lots of money. But consumers do have a problem with these retailers when they start asking for help just to keep their profit margin up. The changes these retailers are asking for will either cost taxpayer more money (to collect GST on oversea purchases) or lose a chuck of GST money (to GST exemption). Either way consumer it will cost the consumers.

Russ Lewis

24/05/2011 at 04:41

This whole discussion is ridiculous. So long as the Australian Government allows its citizens to avoid taxation with the argument that it would cost the government too much to collect the tax, I believe that Canberra has totally missed the point.
If citizens wish to import anything from overseas, it should be the importing citizen who pays the administrative cost of collecting the tax that Parliament has decided is due on the item.
I happen to live in the EU (though my brother used to work for the ANAO in Canberra). The 'small transaction' limit (below which tax doesn't have to be paid) for EU imports is something like A$30. If I buy something online from Hong Kong costing more than this, I have to pay import duty, Tax (VAT) and an admin fee for clearing the item through Customs. Would this be so difficult in Australia? If Parliament has decided on a tax, it seems lunatic to allow such a simple way of not paying the tax. Perhaps salaries should be tax-exempt if paid from offshore?

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