Why GST Isn't The Big Competitive Issue For Online Stores

Large local retailers love to claimed that online shopping is unfair to them because overseas sales don't attract GST for sub-$1,000 purchases, and they've even persuaded the Productivity Commission to examine the issue. SmartCompany has a well-put summary of why the arguments pushed by the big retailers are fundamentally wrong-headed.

None of what the piece is an earth-shattering revelation; we've noted before that big companies who argue they're disadvantaged by online sales but have no online option themselves don't have any real basis for whining. But it's a good resource to point any less tech-savvy relatives and friends to if they try and tell you that online shopping is "bad for the economy" with no more basis than a corporate-funded advertising campaign.

5 reasons the big retailers are wrong [Smart Company]


Comments

    I agree, I'd still be saving at least 30%, including shipping, by shopping online even if I had to pay GST. But are our retailers the main cause of high prices here? Local Apple hardware (iPod etc) prices are competitive. In this case they control the supply chain right out of Shenzhen. With iTunes, where a local distributor (EMI, Sony...) is involved, we end up paying twice as much as in the US. Is this the real problem - regional wholesalers screwing local retailers?

      @george umm most Apple gear is about 20-30% more expensive in Australia, and our dollar is currently worth more than the US. Your argument is a prime reason WHY retailers tend to screw "rich" Australian's.

      Im currently travelling in Japan and had to stop myself from going overboard on all the cool and relatively cheap stuff Around 30% cheaper on average, although you can get similar deals on eBay.. I wonder why.

        @Willem... As an example... iPad (16G WiFi) USD$499. Add 10% GST for an equivalent Australian comparison gets us to about AUD$550. The Apple Australia price is $629, about 15% higher. iTunes, with Sony or EMI Australia Pty Ltd involved, is 50% higher.

        There's a lot of big retailer bashing going on in the press now. There may be other parts of the Australian supply chain more to blame.

        For many local retailers their wholesale purchase price is higher than the US retail price for the same brand name item. Having a local online store won't help (I buy from the iTunes US store instead of their local online store). Just wait until the big Chinese retailers get started with direct overseas online sales.

        In the long run this all could be very damaging for the local retail economy (and employment) - and big retailer GST winging or big retailer bashing isn't going to solve it.

    There may be an element of regional wholesalers screwing local retailers but they are not powerless to act.

    The biggest problem is that local retailers have either no online presence at all or a site that does almost nothing. Compare prices and specifications? Forget it.

    Have the likes of Gerry Harvey been living under a rock for 5 years? Where are their business planners? Absent at the races or sailing yachts I suppose.

    I do shop at a couple of local retailers who have excellent online presence, but they are the exception rather than the rule.

    I have no sympathy whatsover for the big whingeing retailers who are still living in last century and failed to set up a proper online prescence.

    The overseas online stores are just filling the void left by their corporate ineptitude and laziness.

    Poor Gerry Hardly Normal, instead of investing and opening stores in far of places like Ireland (bet his sales numbers have taken a slight dive there). He could have spent a fraction of the set up cost opened a proper web presence like JB HiFi (although not perfect) that seems to do quite well selling big box items via the web. Wouldn't be surprised if he had Greece earmarked as his next assault on retail kingship.

    It's quite disappointing that the major retailers that are complaining still don't have online stores and is one of the major reasons why I don't buy for them due to the inconvenience.
    This is mostly due to brick and mortar stores not keeping up with the times and selling overpriced goods that they used to be able to get away with. It just frustrates me that many UK and US stores are able to have great online stores that work for the customers and yet Australia is considerably backwards when it comes to the internet.

    With O.S online stores, many times we get discounts far beyond the GST percent, so it's not going to make them any more competitive if we had to pay GST. It just means more money going to the government.

    Gerry Harvey deserves drown in in swollen Fitzroy River for his comment about online shoppers.

    Local retailers (and in the IT industry I can further pass that blame to distributors and vendors, so it isn't just the local retail store) seem to raise price within days or a couple or a week or two when the exchange rate goes against them. However, when it goes the other way as it is now it appears to take them months to readjust their prices. The lack of GST is offset by the shipping anyway.

    What also draws me to purchasing online isn't only the lower price but also the lack of a sales person talking absolute bollocks and telling me he'd buy the same for himself, his mother, and best friend's dog if he were to buy whatever device or item it is that I was interested in.

    I research all my major purchases well before setting foot in a store to actually buy the item. I just want to get in, pay for it, and go home. If it's a big ticket item, maybe haggle a little. I don't feel like waiting in a large store in a queue of 20 people asking 20 questions each while trying to stop their kids opening every box on the shelf at the same time.

    Online purchasing, and it doesn't have to be from overseas, just saves so much time and effort. I've found SLR camera lenses from Australian online stores (so I do pay GST) but cheap shipping, for half the price that they are in the local camera store.

    The reason people are not shopping at Harvey Norman is because theyre consistently more expensive that other brick and mortar stores. . . let alone online stores.

    All this is irrelevant to the GST issue, which is a straightforward matter of tax equity. There's no conceivable reason for retailers to be able to slip through the tax net, helping to deprive the Australian commons of what it needs to keep our civilisation reasonably healthy.

    Whether Australian retailers compete or not is up to them, and doesn't really need public discussion. Whether we allow selective exclusion from what's supposed to be a universal consumption tax is up to our democracy. It's not imposing a GST on overseas online purchases that has to be justified, it's offering an exemption. I've seen no justification offered so far.

      The question then becomes, is it worth it to employ another 100 people to check, calculate and charge GST on items below $1000 value..
      The figure used to be $500 from memory (I had to pay GST on a minidisc player I imported because I was stupid and bought an extended international warranty which pushed the price over the $500 mark!), I'm unsure why that changed.

      At some point, it becomes a cost to taxpayers to have people employed to collect the 25c GST from my latest DealExtreme haul.

        If it was beyond our collective wit/wisdom to collect a particular tax, then the thing to do would be to find a better tax, not to offer unprincipled exemptions.

        But it hasn't been demonstrated that collection would be that expensive, only asserted by people who want cheap stuff (ie. don't want to pay their way).

          The fact that it wasn't made mandatory right from the introduction of the GST does suggest that the collection cost was seen as a barrier.

        @Angus Kidman: "The fact that it wasn’t made mandatory right from the introduction of the GST does suggest that the collection cost was seen as a barrier."
        (a) "was seen as" isn't the same as demonstrated
        (b) don't underestimate self-interest on the part of policymakers. We have no rent controls or civilised tenancy mechanisms in Australia mainly because the majority of MPs and senior civil servants are property investors, not renters.

        Without proper evidence, it's all just supposition. And no-one's producing the evidence at the moment.

          Agree that some actual figures would be nice.

      One significant reason that the government does not collect GST on imports of less than $1000 value is that it is not economically viable for them to do so. The cost of assessing, collecting, processing and policing the tax makes it not worth their while.
      There are some key factors that seem to be not included in this debate:
      1. The exemption from paying the GST on low value imports is not only related to online overseas sales. This provision also applies to overseas telephone sales, mail order and duty free shopping while traveling overseas. I would like to know why Gerry is targeting only online sales? Is duty free shopping his next target? So Bob, are you inferring that duty free shopping should lose its exemption too?
      2. The government still collects GST on a huge portion of overseas online imports of less than $1000 value. If those goods are imported to be resold, and the retailer is GST registered, then the government will still collect the GST on the final sale price. The amount that they collect will be exactly the same amount that they would collect had the GST been charged at the point of import. The only difference is that the importer does not collect an input credit for GST already paid. The only people benefiting from this exemption are people importing for personal use, and micro-businesses who are not GST registered.

    GST doesn't even come into it for me. I shop online because sometimes it can be more than 50% cheaper to get things overseas. I especially found this at christmas when I bought a Red Dwarf boxed set from Amazon UK. I paid $30AU and that included shipping. Here in Australia the cheapest I found was $80. Even if I added GST to that purchase it would still be massivly cheaper to buy it from the UK. The same goes for the manga books I sometimes buy my son. I try to support our local book store and buy from them but they charge me $15 for one, whereas the bookdepository charges me $7 so I can buy two for the same price! In fact the book depository are so cheap I would imagine the book store probably sources books from them too!

    "There has grown in the minds of certain groups in this country the idea that just because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with guaranteeing such a profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is supported by neither statute or common law. Neither corporations or individuals have the right to come into court and ask that the clock of history be stopped, or turned back."

    - Heinlein, Life Line, 1939

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