In ancient times, being the bearer of bad tidings was a risky profession. Great leaders chose their messengers carefully. If the message was that bad, there was no need to use a highly ranked messenger, because everyone assumed that he would be killed upon delivery. A higher ranked messenger was worth using if the message could be spun – and these messengers survived and gained status by excelling at this task.
In launching a campaign to overturn the tax loophole that exempts overseas internet purchases under $1000 from paying GST, the Retail Coalition, lead by Solomon Lew and Gerry Harvey, failed in selecting an appropriate messenger which then in turn did not deliver the true message. If they thought the Australian consumer would rally around a call by Australia’s leading retailers to levy a tax to support their competitiveness, then they really are as out of touch as many commentators have claimed. The outcome is a message delivered poorly, missing the point which has made the messengers sound self serving.
But despite this failing, the underlying issue is serious and deserves careful consideration. It is not about large retailers being under threat but rather the reality that vast masses of Australian Small Businesses exposed to this particular inequity may well suffer far more than the big end of town as their livelihood is at stake.
Small retailers have taken advantage of the Internet. They are servicing the need of Australians to shop online with competitive pricing and superior service levels against their large retailer counter parts. The result is that their margins are slimmer. They are disadvantaged directly by the 10% disparity in price compared to their overseas rivals.
I personally don’t care if Harvey Norman’s or Myer’s profitability is adversely affected but the uneven playing field does affect hundreds of thousands of Small Businesses, and for the families and employees of these, it’s another matter all together. I have argued before that the body politic in Australia fails to adequately consider how policy settings affect Small Business and that the lack of lobbying power of Small Business ensures that Governments of all persuasions serially ignore their needs.
Despite this, Small Businesses stoically soldier on, with little complaint, against what often seem unfair odds. The $1000 GST exemption is exactly such a case. Australian consumers need to understand this exemption in the context of the survival of tens of thousands of small businesses owned and staffed by their friends and families. Whilst we all like a good, cheap deal, we as a nation are fair people. We won’t wear sports shoes delivered cheaply to us on the back of child labor in Asian sweatshops. Similarly, we shouldn’t be so quick to save a buck when it comes unfairly at the cost of a battling small Australian retailer who is immediately 10% less competitive due to a tax loophole delivered to non-Australian retailers.
This is an important issue, but unfortunately the message was crafted badly and atrociously delivered, and consumers were rightly skeptical. But I urge you to review the impact of the facts. This is not about the profits of large retailers, but about the basic fairness of our tax policies towards decent, everyday Australians who are trying to have a fair go without asking for anything from anyone. The Australian Government refusing to take timely action on their behalf is yet another indictment of a Government that fails to support the millions of Australians who are dependent on Small Businesses for their future – as owners, spouses, family or staff in the over 1 million small businesses in Australia.
So I support the campaign by the Retail Coalition to overturn this unfair and inequitable tax exemption. Small Australian retailers are already doing their best to compete with large Australian retailers and they should simply be allowed to compete on a level playing field with overseas counterparts as well.
If the Australian consumer has to pay a consumption tax on foreign imports, then we should all see that as the fair consequence of being subject to Australian tax law – which ultimately pays for all the Government services we enjoy. That is only fair, and as Australians we have long known and accepted that there is a price to bear by playing fair.
Larry Bloch is the CEO of Netregistry.
Larry,
I strongly disagree with your argument on a number of basis.
1) The implementation and cost of such a strategy has been shown to be unfeasible already by a taxation study. The cost of monitoring every import and extracting 10% GST is blandly unfeasible. The ATO would have to implement huge systems to monitor imports and you are only complaining at the moment because of the high Australia dollar. Let’s assume it falls back to around $0.80 USD in 1 year or 1.5 years (which is the length of time if would take to review and implement systems anyway) – then the price competitiveness gap falls, and overseas retailers are no longer as competitive. We have effectively wasted millions – if not billions of dollars – to “placate” business owners in the short-term.
2) Margins that are applied from Australian big and small retailers are a joke. You can use applications such as RedLaser to discover the disparity between instore pricing and online pricing to see the differences between margins. If pricing was even within a 10-15% gap – then many couldn’t be bothered waiting for postage and overseas delays but it’s clearly not. Even with a 10% GST slap on overseas goods, local retailers aren’t even close because they are high margin businesses. Change the servicing attitudes of staff in store and become more price competitive for consumers to more adequately shop locally.
3) It’s anti-competitive. You are effectively wanting a taxation scheme to force overseas retailers to stop servicing Australia. This is exactly the aim and this is exactly what it will achieve because most businesses will not want to have to keep track of deliveries to Australia [if this is how the scheme is implemented]. This means large organisations like Amazon won’t ship to Australia if the cost is implemented onto them and they are expected to keep track of taxation. When the USA economy recovers and the dollar loses strength – you have now made international shopping useless.
You need to “look closer to home” for problems rather than blaming current economic factors and attempting to force policy change to solve problems. Everyone just wants competitive pricing and good customer service – both of which are significantly lacking in many retail stores in Australia. Further, the pricing margins that local businesses attempt to force onto consumers is a joke – even buying ONLINE in Australia is cheaper than most bricks-and-mortar stores.
The application of a GST-tax doesn’t solve anything because even with a 10% addition, pricing is still cheaper. So the only thing this does is placate proponents like you during boom economic times but costs Australian tax payers billions to implement and manage a system that will ultimately reduce the competitiveness of the Australian online landscape.
Seriously Tom, what a bogus argument at every level.
customs can take samples of imported goods – so no argument there.
many businesses are now selling goods at 10% margins so the Gst is the difference between profit and going broke.
The is simply no argument to support your selfish and in Australian rant. we are a small country and need all the revinue and protection we can get. Mining does not employ enough people to ignore the millions of people in retail.
I can understand why the big retailers are squealing and being a small business owner I can sympathise with small business retailers and their situation as well. Larry, while you may not care about the plight of Harvey Norman, Myers, David Jones etc just remember these businesses employ tens of thousands of people and in many instances they are anchor tenants of many shopping centre complexes. They spend millions on advertising and promoting their products and services, sponsoring and supporting charities and events. All which employ people etc, etc.
Many of us will have shares of these companies in our super portfolios or shares in companies such as Westfield, AMP who own the complexes they rent space in. If they were to collapse then the flow-on effect would be profound- who would absorb the 1,000s of seemingly incompetent sales staff and shop assistants that both Larry and Tom complain about, what businesses would then rent space in shopping centres if these businesses had failed because of the onslaught of cheaper online retailers. We could well end up with hectares of retail space around our cities permanently vacant.
I don’t want to lose the vibrancy and variety of our cityscapes that big and small retailers provide, I like interacting with people and touching what i want to buy before I buy it. I enjoy the creativity of display & interior designers none of which I get from an online shop. While I have met the occasional slightly rude or uninterested salesperson I haven’t experienced the seemingly unbearably ignorant or incompetent sales staff that everyone complains of – in the end they are just people some are good at their jobs, some are not so good.
My biggest fear is unwittingly because of this obsession with getting everything cheaper, cheaper, we have outsourced our manufacturing to China and other Asia countries, and it would seem we are about to outsource our retailing to other countries as well.
I don’t have a solution to the problem but why can’t a 10% GST charge be applied by adding it to the credit card bill, most transactions have a transaction fee added anyway so why not add another 10% and the banks & credit card companies can feed the money back to the government.
In the long term both government and business need to get together to develop a policy for trading which is based on a same laws and regulations for all. No-one is a winner in the race to the bottom of the pile.
Adding the GST to anything bought online will help “small business”. It may not help them much, but it will help to a small degree. At the moment it is quite unfair. As Kenzo said above, just add the GST to the credit card transaction (ie: no big slug in Govt spending with ATO staffing up).
Online shopping will, in the end, kill all retail business in Australia… and in turn increase unemployment. Everybody wants to view, touch and feel the product – but then they buy it on-line. In effect they are wasting time and resources of small business retailers who get NOTHING out of it at all… except all the costs. More and more are going broke.
Australia has prided itself on good working conditions, with minimum wages etc… plus all the awards, holiday pay, overtime rates, sick days, workers compensation bills, insurance, superannuation, electricity, advertising and shop-fitting costs. Many online stores do not have these expenses… especially the “overseas stores”… hence I believe normal retail prices are not exorbitant at all (as was suggested above). Ask any run-of-the-mill retailer. They are not all driving flash cars, living in big houses and going on world trips. Many are barely making a living.
It is my firm belief that the “internet” and on-line shopping will eventually see the demise of general product retailing in all the 1st world economies. It’s only a matter of time.
I used to work for a small business that took full advantage of the lack of GST laws on imports.
They were a bookstore, and if a title hadn’t been released, or if there was a superior edition overseas, they’d order it in.
The only thing the exchange rate means for them is that they get more competitive against Amazon.com.
Besides, the dollar will subside. A bit daft — greedy even — to impose taxes on it given that fact.
Why doesn’t the tax office outsource the collection of applicable GST to the freight companies (DHL, FEDEX etc) who bring the goods into the country. That’s what happens here in China, where tax is paid on anything over the value of around $200. The tx office has nothing to do with it, you agree to pay it to the courier company before they deliver the goods to you. If you don’t want to pay it, you don’t get your goods.
Hard to stick up for a tax, but surely the only beneficiaries of this loophole are companies overseas, ie in China. We are not talking about international shopping, we are talking about sending Australian money over to China and surrounding countries in Asia, to the detriment of any remaining manufacturing in Australia. And then we complain about high property prices, which ironically is being caused in significant part by people from Asia coming in and driving up demand for housing.
I don’t ever remember bringing an Australian good into China without paying a steep charge to get it in.