The push to add GST to all online sales made to Australians — not just those which cost more than $1000 — appears to be gaining momentum. The argument is that we need to create a “level playing field” for Australian businesses, but when the price difference for some goods is already as high as 200 per cent, the idea that increasing overseas costs by 10 per cent by adding GST will cause a change in buying habits is frankly laughable.
Playing field picture from Shutterstock
Currently, GST only applies to online purchases if you spend more than $1000. The basic logic behind that threshold has been that the cost of imposing GST (and other customs duties) on goods as they arrive into the country is higher than the extra tax that would be collected.
Local retailers have long pushed for a change in that approach, arguing that it is fundamentally unfair that they have to charge GST to Australian customers but their overseas rivals don’t. These arguments are often remarkably self-serving and inconsistent, but that doesn’t stop them being made.
In recent weeks, state government leaders have also pushed for a change, since they rely on GST revenues to fund much of their activity. The National Retail Association has also called on the Coalition government to alter the policy, using the “level playing field” argument.
It’s still far from evident that the amount raised would actually cover the cost of collection, but there’s a simpler problem with this argument in commercial terms. As we’ve pointed out before, the price difference for many items is far higher than 10 per cent. It’s often the case that even with added postage and (for argument’s sake) an added 10 per cent, buying from overseas remains cheaper.
Given that, why would anyone change their buying behaviour? The playing field is already so far from level that this one switch seems unlikely to make any difference.
A study released today by CHOICE covering the fragrance and cosmetics market further underscores that point. CHOICE compared the cost of some popular products through large retailers’ online sites (David Jones in Australia, Boots in the UK, and Walmart in the US). Here’s what it found (with prices converted to Australian dollars):
Product | AU | AU (ex GST) | US | US in AUD | % diff | UK | UK in AUD | % diff |
---|---|---|---|---|---|---|---|---|
MAC Lipstick | $35 | $31.82 | $15 | $15.77 | 102% | £15 | $25.33 | 38% |
Revlon Colorstay Ultimate Suede Lipstick | $25.95 | $23.59 | $7.48 | $7.86 | 200% | £8.99 | $15.18 | 71% |
Clinique Chubby Stick Moisturising Lip Colour Balm | $35 | $31.82 | $17 | $17.87 | 78% | £ 17 | $28.71 | 22% |
As CHOICE researcher Kate Browne put it in a statement announcing these results: “There is no way price differences of this size can be explained by the usual arguments we hear about supposedly higher costs of doing business in Australia.” Until those differences are less apparent, our shopping habits are likely to remain online and overseas.
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Comments
32 responses to “Why Adding GST To Online Sales Won’t Create A Level Playing Field”
10% is nothing compared to the savings available ordering online overseas, and the local retailers know this. The real purpose of this strategy is to increase the inconvenience of ordering online overseas through requiring collection of the GST.
gonna disagree with you!!!!! my buddy gerry harvey says it helps keep jobs in australia! 😛
Nothing much is going to change really. If it costs me $250 for a tablet from HK and over $400 in Aus, even with shipping and GST there is no comparison.
We all know the running joke about it being cheaper to fly to the US to buy Adobe products…
Sure in an ideal world we should be buying locally, but the cost divide is too much. If it is cheaper and easier to buy a comparable product online, I will strongly consider it. Especially as a lot of US based retailers will ship things via DHL or FedEx quite cheaply and it will be at your door in a few days.
From what I’d seen recently on TV the push is to not only charge the GST, put make the recipient pay the customs costs based on a model adopted in the UK. This would be different to how this as opposed to the government, who’s own assessments show that collecting GST would cost more than the revenue it would collect
From memory I think they were talking about a $40 or so assessing fee – so your $15.77 MAC lipstick would be $15.77 + shipping + $40 in assessing. So $45.77 + P&H
Gerry Harvey is probably doing his best Mr Burns impression right now.
Free Trade Agreements would prevent this assessing fee from being implemented.
It’s easily argued that it’s a “hidden” import tariff.
I’m not across all of our Free Trade Agreements, so I’m not sure of the relevance, or how this applies. But what I do know is that this is already occurring for items over the $1,000 threshold:
http://www.customs.gov.au/site/page5549.asp
This Crikey article sums it up quite well, and references Choice’s views: http://www.crikey.com.au/2013/11/27/campaign-to-jack-up-online-gst-is-protectionist-and-lazy/
This change is only intended to generate extra revenue for state governments. The whole ‘level playing field’ does not even factor into the decision around why the government is pushing for it.
The retailers and government seem to be on completely different wavelengths with this one. The government want extra revenue and on top of raising GST to 12.5% they are going to tax online sales. They could care less if it means more business for local companies as they will still be getting their taxes anyway.
This won’t help places like Harvey Norman anyway (the biggest whinger about online shopping) as everything they sell has a 500% mark up that even if you increased GST to 50% it would still be cheaper than buying anything from that archaic pirate.
There is a higher cost for doing business in Australia. It’s called a “ripoff tax” for the people.
Then again, when you start a country out by shipping criminals there, what do you expect to end up with? 🙂
gold…..
kiwi?
No, aussie 🙂
finally, one who admits the truth!
I buy many things online cheaper than I would in store and the majority of sales are made from Australian sellers. So it wouldn’t make any difference at all to me I’m already paying gst and saving money.
Cost of collection, administration, reporting and so on. The actual costs of collecting GST on any imported product (what about services?) will be very high, but then this is becoming political so the government may try to implement the changes regardless in a futile attempt to ‘protect’ uncompetitive local industries.
It raises many questions about our models of taxation and protectionism – both models are antiquated and no longer work in a global economy. The inefficiencies of both models are paid for, as always, by the consumer & taxpayer – and no thought is given to the effects it has on overall consumption and spending.
Our government wants to tax everything, every which way possible – and protect its biggest stakeholders – big business, not the taxpayer.
Why should I pay a GST on goods and services purchased from another country? It has nothing to do with this country and is segregated…..
its a disgrace so what if stores close down that’s their fault, online the way of the future update your technology and maybe customers will buy your product. australias stupid and so is the government for making dumb taxes and laws. no wonder this country is hated by evey nation in the world..what a disrace
RC Cars and Video games are often more than a 50% price Difference.
RC Car $300 in Australia. $90 + $40 (Express) shipping from Japan. Add GST ($9) & a $40 collection fee and it’s still $120 cheaper to buy online.
Ozgameshop get $100 games down to $20 long before JB and EB do. They even have a better range. Although EB is currently selling AC4 cheaper than Ozgameshop via because of EB’s sale.
If they want to level the playing field, they need to lower our prices as distribution levels because now days it’s just more obvious we’re getting screwed on everything from lipstick to Video Games. And we have a fast, safe and easy way around it.
If a Tax is designed to make money, and this Tax would lose money it’s just a waste of time to implement. I also recall that the GST was supposed to get rid of hidden taxes and reduce the prices of things we purchased which had hidden tariffs. I don’t know about you but I didn’t notice the prices go down. I suspect if the Carbon Tax that is currently driving up petrol and electricity disappears our prices are not going to go down.
That’s a slightly unfair representation of their proposal, Angus.
The push from the states includes a proposal to deduct the cost of implementation from the revenue received by the states. The figures I saw suggested that the $20 GST threshold proposed would bring in approx. $0.6 billion, and cost approx. $1.5 billion, and the difference would be deducted from the GST income provided to the state governments. So the proposal by the state governments isn’t unreasonable.
What is unreasonable is the why of the proposal. Given that it clearly isn’t to raise revenue, it can’t be that. You’ve already highlighted why it can’t be about equity. And I don’t think anyone is trying to increase the number of people employed by Customs.
To me, the only logical justification is that retailers want to make online shopping for Australians much less convenient. By increasing the red tape and regulation around individuals bringing goods into Australia, it would likely decrease the likelihood of a customer buying from overseas. I’d say that should drive customers to Australian online stores, but as has been recently pointed out, Australian retailers’ engagement with Internet shopping opportunities is a disgrace.
Ultimately, the push by retailers – both directly through media, and indirectly by lobbying state governments – is to prop up their increasingly broken bricks and mortar retail models by introducing a form of protectionism-by-stealth. And if that’s what they want, they should have the guts to come out and say that, and stop all this “level playing field” BS.
Have I ranted about this before here? Sorry.
I’m a photographer and the Australian prices are way higher then overseas. Say for example the Nikon D800 is around AU$700 more expensive here then overseas.
I understand that costs are higher in Australia then lets say Singapore, but I can’t really understand why the massive price difference.
I’m all for leveling the prices. But adding a tax won’t help that much. What we need is more incentive to retailers and industry in Australia. The government is so up the mining bubble that they seem to forget that a country need other industries to guarantee it’s future.
“but I can’t really understand why the massive price difference. ”
The previous government held an inquiry into the price of software here in Australia compared to overseas, if i remember correctly they spoke to Microsoft and Adobe amongst others and asked why there was such a large price difference between the same software that is being sold in America and Australia.
Both Microsoft and Adobe could put forward no reason for the massive price hike for the software in Australia, the conclusion was that the price is that high because they can get away with it.
The government then suggest people use a work around to get around the geoblocking that was preventing them from getting the same digital software for a cheaper price.
Want to make it easier on Australian Retailers and Australian E-Stores?
Then Why the Fuck did you let Australia Post raise the price of postage to an ungodly amount to price Australian small business out all together…
in 2010 the price to post 6KG to Canada was $75 (ish)
now its $130…
now with the bullshit TPP we’ll be headed back to the early 90s for sure…
I just ordered Xmas gifts from Thinkgeek last week, 7kg’s of items couriered via DHL (got here in 3 days) cost me close to $60 to ship. I checked Australia Post and Sea Mail, which is the slowest option was over $90, want to ship it quickly? $150-$250+ is going to be the damage. It would literally cost me more to ship the items than they were worth!
This is before we go into the hundreds of dollars I saved by not buying equivalent items here….
I think the gov would be wiser to sort out a way for cheaper shipping via austpost for AU based web stores.. The cost of postage alone is what also makes buying locally vs. Overseas.
Not only is Australia Post expensive, Theyre SLOW. I’ve received on numerous occasions items ive purchased overseas before items purchased interstate on the same day.
Don’t worry the coalition is looking into privatizing Australia post, things can only get worse price wise from here on out.
If they close the gap between importing or buying locally by making importing more expensive then people will recover the cost by importing more.
Australian retailers want a level playing field. Nothing about that is laughable.
Using cosmetics as a example – Laughable
“Sometimes the price difference is more than 10% anyway” –
Anyone buying overseas should remember what a good deal we get with our consumer protection here.
“GST revenues to fund much of their activity” – Yeah the State governments want money to pay for police, schools and healthcare. Villains!
“It’s still far from evident that the amount raised would actually cover the cost of collection” – I guess we should stop RBTs too
Why is using cosmetics as an example laughable? I’m not trying to troll, but if there is a valid reason why they shouldn’t use cosmetics, I’d love to know.
I also think the difference between the cost of collecting GST and the cost of running RBTs is RBTs save lives.
Coming from a Country (New Caledonia) where you have import taxes for everything above $40 ($300 when you travel). It is a real pain in the neck, as to fly from France to New Caledonia, it takes about 3 days, and to clear the custom takes about a week … imagine all the delays that this will create as all the parcels will need tax invoices and custom declarations, then it will need to be calculated and collected by the Post Offices. No more parcel delivery to your door, you will have to collect it from the office in every case …
Good point,
Then the real headings we’ll see should be “Import Tax costs Australia Thousands of Jobs”
Funny how – When they ship jobs overseas it’s going to be “Much better for the consumers” (i.e. “I will get richer by exporting jobs and the customers will pay the same bloated price) yet when the consumer offshores their purchases they whine like 2 year olds!!
Tough luck DIck and Gerry – we’re playing you at your own game – See YOU at Centrelink soon!
Australia has extremely strong customer protection laws and regulation. Those laws are added to the price of the products.
1 example – A lot of phones only come with 12-month warranty, and now phone companies selling phones on 2-year contracts must provide a 2-year warranty. Previously Optus charged $4 a month for 12-months for the 2-year warranty. Now they have to provide it for free. So to cover that cost, they reduced the included data in all their plans. So they force everyone to buy it, whether they want it or not.
Regulation adds to business costs. No country has close to the amount of regulation Australia does. Go the US route. Almost no regulation. Allow shops to open 24/7 365 days a year if they want. Don’t restrict what stores sell. Go into Walmart in the US & you can buy everything. Not allowed here. We have ridiculous rules on shelf labels & advertising. Everything adds to retailers costs.
so here’s a hypothetical.
What happens if someone buys me a gift from overseas & mails it to me? am i expected to pay the additional GST?
Exactly what I was thinking. However, being a little more evil, was considering buying 100’s of $1 items from DX.com (or similar) and post them all to Gerry Harvey.