Can Anyone Defend Imposing The GST On Overseas Online Sales?

Can Anyone Defend Imposing The GST On Overseas Online Sales?

It’s a line of argument that Gerry Harvey completely denuded of credibility: allegedly the main reason shoppers buy online is that the lack of GST on online purchases under $1000 makes them cheaper than local competitors. It takes about five seconds of work to demonstrate that that position is total rubbish, since the savings from overseas shopping on many products are way higher than the 10 per cent GST rate. So will anyone stand up to support it?

Picture by Chris Hyde/Getty Images

One woman who will is Margy Osmond, CEO of the Australia National Retailers Association (ANRA). To be clear, that’s her job; the official ANRA position is that any purchase over $100 should attract GST. But at a lunch hosted by marketing company Salmat, Osmond was staunchly ready to defend that approach when I asked her about it. Her stance: “We think the threshold should be lowered for any number of reasons.”

That said, she doesn’t pretend that GST is the whole story. “GST alone is part of the puzzle.” Other issues the ANRA is concerned about are the cost of salaries in Australia, bans on parallel imports and the relative inefficiency of the local supply chain. Collectively, those might account for the apparent price differences, but it’s far less evident how the issue might be resolved.

For instance, one ANRA argument is that Australians should be willing to pay GST, since if we don’t then there’s less money feeding into the taxation system. By ANRA’s estimates, overseas sales account for at least $630 million in lost GST each year. Osmond argues that number is on the low side, since it doesn’t include fraud in the form of parcels shipped in with a falsely low declared price.

But whatever the numbers, that assumes a level of community interest which, to be frank, Australians appear to shy away from in droves. If we were genuinely concerned about the current welfare of our society, we wouldn’t freak out about the carbon tax or about paying more tax to support the education and health systems. Poll data suggests that’s far from a universally held view. Indeed, we seem entirely capable of railing against people getting paid lower wages or getting sacked while simultaneously complaining about the price of absolutely everything we buy.

In short, we’re contradictory, but we don’t want to be told that. We want cheap goods while everyone gets a decent wage. It’s not going to happen, but we’re not going to stop complaining while it doesn’t happen.


  • Retailers should be negotiating better prices from the distributors.
    Also I get better customer service in most instances from online retailers then I do in stores here in Australia. Their product knowledge is extensive and their prices are right.

  • So, uh, have they decided on how they’re going to get the GST from a retailer in China? I can pretty much assure you any online retailer, that isn’t in Australia and already collecting GST, will tell the Australian govt. to go jump.

    Or is this just so they take a closer look at retailers like Kogan that use offshore business arms to import?

    I’m laying my money on it being the second option.

    • Overseas companies don’t charge you GST, customs stings you the 10% when it lands. This is how it currently works for sales over $1000, why wouldn’t it continue to work for sales under?

      (I don’t support the proposal, by the way, in case it sounds like I do)

      • Because the costs of collecting that 10% would be higher than the amount of revenue it generates. Also it would probably hold everything up for ages, create huge backlogs at customs and generate utter chaos.

        • However the benefits of collecting the revenue are more than just the amount collected. It will help support Australian jobs, and the revenue should be multiplied by 3 times to get the real impact on the Australian economy.
          For example if I buy a product from Chine via a-Bay there is almost zero chance that any of that money will return to me in my business as a online strategy consultant. However if I buy the same product for more locally, the chance is much better.
          So my decision is between saving some money now, or my business being more successful in future.
          There is no free lunch – all Australian’s are affected by this to some extent.

          • Have you not though of how this will affect smaller Australian retailers that currently resell goods from China/India that are under the $1,000 import tax cap?

            For example, I import 1,000 red foam clown noses at a cost of $0.30 each, which I then resell at $2 each. Now, because my profit margin is being eaten into, I have to sack one local employee because their wages are now being used to pay an import GST.

            Yeah, that’s supporting local jobs alright.

          • As you appear to be obviously operating a business you would be able to claim this GST back as you would be adding it onto your products as you sell it to the consumer. This tax will only affect consumer online purchases.

          • I don’t think you know how GST or tax in general works. It’s not a loan you can just get back.

          • I cant beleive you can make a living as an ” Online Strategy Consultant” its patently obvious you dont work hard for your money becasue you are endorsing this absurd TAX . Your Logic is totally flawed and driven by you self created Fairytale JOB! You state that aussie should pay more to get a return from money being spent here? Well aussies paying 2 – 3times as much for a product is feeding local retail greed ! How does this help or flow on to Australian Jobs? JB HIFI is one of the only stores locally that copetes with online sales , they seem to be doing very well becasue they are PRICE COMPETITIVE ,RANGE SAVVY and emply basic wage employees as do all of the other big greedy retailers . as for the NO FREE LUNCH – you are living it with your fairytale job ! I might start an “ONLINE HUMANITY & EQUALITY CONSULTANCY ” god knows what I would do but the name is grand ! hahaha

  • Service, service, service! – not everything is about money. Think about what you CAN do here, you’ve got the product there for the shopper to take home then and there – Massive advantage!. You’ve got (hopefully) an expert who can show them how to use it / how it compares to another product / features – massive advantage!. Online can never compete with either of these really.

    Also, try to provide a valid reason (other then “our costs are higher”) for us to pay more, we know you have costs but so do consumers. Understand how consumers buys things these days. Having counters not staffed isn’t going to help. Having people who don’t know what they are talking about, isn’t help. Crying that someone has it cheaper then you, isn’t going to help. What did you do when your first competitor moved in next door? did you complain, or did you do things better than them. THINK!!!

    Lastly, Harden the f*ck up! You’ve had it too easy for too long, learn to fight and win or walk away! Rocky did it (other than Rocky 2 or 3 – lost in one of those), David beat Goliath, you can win too!

    • Hay Nottle, no offence but I’m taking a wild guess you do not run a business under Australian laws, requirements and regulations? You tell us to give you a reason other than the LARGEST one possible, the cost of doing business in Australia IS very high and allot higher than just about most countries in the world yet Australians demand cheapest prices yet along having a very small population that can’t move the volume to help reduce prices.

      I work for a distributor and I can assure you we overall make single digit margins on our products which is already crazy as it’s getting to the stage we’re almost better off closing the business down and putting money in the bank for a guaranteed return with no risk! As mentioned above Australia simply does not move the high volumes of product to make it possible to import ship loads of product which is what is needed to get the best prices from manufacturers and labour and business running costs in our great country are simply far to high to even come close to what overseas competitors run on yet alone workers rights which just about don’t exist in allot of the countries you purchase from online hence why service is also so much better allot of the time… The person overseas is VERY happy to even have a job and makes sure they do their very best so they can keep their job for another day.. In Australia staff turnover in allot of businesses is very high due to wage wars for example staff always wants more pay yet profits are constantly being forced down to businesses have less money but people want more and will switch company for $1,000 extra a year which is simply crazy…

      We are our own worst enemy but only time will teach this lesson to us all and once our job rates fall as things are already starting to happen such as in Telecommunications, Manufacturing, Mining allot if starting to move offshore other than the basics which need to remain as for companies to stay viable it’s the only option and at the end of the day it’s our own fault… People want the 80-120K wage a year which in some cases is 1.5 – 5 times more than others are making yet we wine about a 20% higher cost due to companies having to pay the high wages.. You can’t ask people to give you a reason when removing one of the highest costs… The other large cost is the retail market Rental prices (eg, Westfield shopping centres..etc..etc.) I suggest you go try and rent a small corner shop and see what your base running costs are and work out how much profit you need to generate just to cover your base costs in our country… You simply can’t compare this to online shops overseas!

      Please look into some of these FACTS and report back with your findings I would love to hear a proper business argument on how Australia can offer the same prices as cheap overseas online shops but run in Australia under our laws, requirements, wages and taxes…etc

      • Jonathan, Please don’t mistake me here, I’m completely sympathetic to your issue with costs of operation in Australia, all I’m saying is we all (if we don’t should) recognise that this is the case. No, I don’t operate a retail store, BUT I also very rarely buy goods online because I prefer to buy it them at a shop after speaking to an expert. I realise that I am a minority (sort of) but price is genuinely only 1 consideration for me when purchasing goods. Service and expert advice is much more important, particularly when making a major purchase. look around, poor service is also a common theme here.

        On the flip side, Imposing GST on online items that are sometime 40% cheaper still won’t help your cause. What I’m trying to say is that as a bricks and mortar store you can have many advantages aside from cost. Your argument is very valid in terms of our pay expectations for a days work and you are quite correct that this will probably end badly for a lot of Australian jobs. All I’m saying is lets think positively about it because GST or not, the issue won’t go away so we all need to find a workable solution. Also, I might note, that the ONLY winner under GST is the government and we all know how rubbish they are at managing our funds and more importantly our interests as a nation.

  • Will every parcel get held up by a week or two in customs whilst an invoice is sent out for the GST component? Will they trust the declared value or gift status? Will I get my parcel while we are arguing over the “true” value or if it goes through the tribunals/appeals/courts?

    How much would it cost to invoke this collection system? Will it be paid for out of the 10% GST or will it be added on as an extra service charge?

    All I can see is a royal PITA. The only benefit being for pencil-pushing government bureaucratic job seekers.

  • As said in the article, there are many sides and details to this, but having imported bulk electronics direct from China myself, and selling at 2000% markup, I know that someone as large as Harvey Normans has plenty of room to move on their prices and still keep all their staff happily employed and have the lights on in the stores. A company that still posts millions in profits each year crying poor…please. If I was charged 10% GST on everything I bought from overseas on eBay etc, I wouldn’t have a problem at all; if it also shut up these local retailers. I’d still be buying items much much cheaper than I could anywhere around here and would enjoy a greater range of products and options. Retailers in Australian need to wakeup, catchup, and get in the game or suffer the inevitable. The retail industry isn’t changing…its changed! Trying to retard online sales wont help; changing their attitude towards their customers buying habits and intelligence will.

    • P33nMaster I would LOVE to know what significant IT product you can make 2000% mark-up on, I work in IT distribution and can tell you we make single digit margin on most products and we still have price wars all the time… I think you are dreaming and trolling just to stir the pot.. if not Please let me know what products you are referring to as I’ll be MORE than happy to look at importing them at a MUCH more reasonable price into our market if it fits our IT model. I’m expecting no reply or details on these 2000% markup IT electronic products… Looking forward to it…

      • Hi John,
        I imported 4WD equipment from china for a little while, and 1000% markups on goods I sold on ebay were not uncommon early on. If you find the right product, and get in early enough, it’s possible to get ridiculous markups. But you are at the tail end of the market, where you are competing with any number of other importers, there are no margins. I got out of the market when the profits were down to 100%, and to continue on I’d need to start renting storage space and hiring staff (that 100% wouldn’t have lasted long….). Also, the number of people importing what I was importing went from 1 (me) to 4 or 5 guys on ebay. I knew when to bail….

  • Honestly, 10% is such a tiny amount that I really don’t care… UNLESS the process for them collecting their 10% is a royal pain in the arse for me.

  • Apparently it isn’t cost effective to tax goods under $1000. So franchisor Gerry and his billionaire buddies really want a fine, not a tax. Times have changed, technology has moved the market. Gerry has been caught with his pants down. Stop blaming us or the tax man. BTW I often buy from physical stores because I can get the product instantly or delivered same day AND it’s often cheaper. I guess Gerry would like to fine me for that too.

  • How is complaining about lower wages contradictory towards complaining about high prices? If wages are low it makes it harder to afford high prices so those two positions are completely in accord, functionally, theoretically, and logically.
    It takes far more twists to devise any sort of a paradox there.

    • Ozoneocean simply because Australia has some of the highest wages in the world and when you run a business you need to pay your staff! To pay your staff you need to sell product, you need to make profit (most of which pays staff wages in Australia)… This means bigger profits are needed to pay the large wage bills… We also do not have the volume in Australia like in countries like the US/EU…

      To make it more simple say you Live in US with a big customer/sales base and can sell 1000 items, each item you might sell for $5 each and your cost price is $3 this means your total sales is $5000 and you have made $2000 profit (before any expenses), so you now pay your worker a wage bill of $1000 for the week and you have $1000 remaining for running costs of the company…

      Let’s convert that to Australia:

      We have a very small sales base so we might only be able to sell 400 items (being generous with this number), each item we might sell for $7 each as our buy price will not be as good due to lower qty’s and higher freight costs (landed cost is higher than US) so our cost price could be say $4 this means your total sales is $2800 and you have made $1200 profit (before any expenses), so you now pay your worker a wage bill of $1500 for the week (yes wages are higher in Australia!) and you are now in the red -$300 and still need to pay rent, back end staff, electricity…etc..etc.. General running costs. Even keep the wage the same (which it is NOT) and you can start to understand why things financially have to cost more if we want higher wages and have a smaller population and less buying power I can’t see how we can have the same prices as larger countries with lower wages, lower business running costs..etc

      Hopfully that explains things VERY basically as to what was trying to be conveyed.

  • I buy online because I know that it takes less time for an item to get shipped to me in Perth from Asia/Europe/USA than it does from the east coast of my own country. Not to mention that I can get better pricing and in many cases cheaper postage.

    And yes, I checked this recently when I chose next day delivery on two different items, one from Germany, the other from Sydney, the item from Germany rocked up (get this) the next day. The item from Sydney took over a week, and that was after it was picked up by Australia Post. Both items were under 100mm x 100mm x 100mm and under 200g (parts for a multicopter)

  • Why is it OK for people like Gerry Harvey to buy products from overseas and shaft the local suppliers, but it’s not OK for the rest of us to do the same to him?

  • introducing 10%GST on overseas purchase is about trying to make it more difficult to shop overseas/online. In order to collect the 10% GST we would probably have to go to the post office in person, and pay it over the counter or some other process that would put many people off.

  • This argument also raises the point about how Australians are massively ripped off for everything we buy and that has a lot more than just GST involved. This is what drove us to buy online. Name any product from a computer game, an apple computer, blu-ray movie, software, cars, clothes, the list just goes on and on. What we need to know is just who is making all the money here. With some we already know such as iTunes who charge us more than other countries.
    On the GST thing you will never convince the government not to do it since to them it is free money, more to waste on welfare bludgers. Only surpriise that they never did it by themselves.

    • Calling your own people second rate. Is this guy for real? I wouldn’t waste my time reading something written 50 years ago. Just because our fore fathers “criminals” turned a pile of crap to gold doesn’t make us lucky. Luck has nothing to do with how our country is today.

      • The guy talks about a lack of innovation and inability to adapt. Isn’t that exactly what were talking about here in the context of the retail sector?!

  • My bank (NAB) slugs me 2.3% on every overseas transaction. It wouldn’t be too hard for the Govt to leverage the existing impost with one of their own, and make the banks administer it. They sure don’t do anything to earn their 2.3% fee, since the forex is handled by Visa, etc.

  • THe distributors are added a huge increase and making deals with manufacturers, the losers are customers and retailers. I have no problem paying an extra 15% on cameras, telescopes and computer equipment but 20% and above the price of purchasing and delivery from overas is a rip off, sometimes its 50%. Salaries for retail shops is not high, otherwise they would be getting a better quality of staff. I have had very good experience with camera sales person at Harvey Norman, and they shut the shop.

  • The biggest cost to Australian bricks & mortar retailers are the middlemen distributors. They take the biggest, most easily cut portion of the price we pay.

    To buy name brand products in Oz (for example Sony, Panasonic etc) you can’t be a retailer and parallel import in volume from anyone esle but through the local distributor. For non-name brand product you can as a retailer deal direct with the manufacturer and import yourself. This is a price maintenance issue that perhaps the ACCC will sort out, or perhaps not. It is price gouging anyway you look at it.

    As an individual you can buy from anyone overseas willing to sell and ship to you. This is the wonderful disruptive technology of the internet and is not going to go away. Just like cinema disrupted radio, TV disrupted cinema, the VCR disrupted TV, CD disrupted vinyl ….

    I predict that most distributors will be squeezed out by virtue of their unsupportable cost impost and an ongoing retailer failure rate. Smart retailers will eventually purchase direct from the manufacturers. Even if GST is applied at under $1000 per order, the savings from eliminating the local distributor will be greater than 10% and may be as high as 40% of the current brick & mortar price paid.

    Why do you think Target can sell $15 jeans? Made in Bangladesh, imported from the factory on a weekly 40 foot container load in volume. They were retailing at $30-35 when Target bought them via the local distributor. Country Road have theirs made in a similar factory perhaps even with the same owners, but use an Agent. Lower volume means higher factory door price, a 40 foot container per quarter, plus warehouse space in oz to hold the goods for 3 months and they retail for over $100. For all intents it could be the same material, same cut, same jeans but different label and different retail pricing. Volume and Agent make all the difference.

    Apply the same logic to any electronics, whitegoods, food or clothing and you see the cost burden built in. Importers/distributors won’t tell you this. Many retailers don’t understand this.

    The Brick & Mortar retailers that will survive already understand this and are making the structural and business model changes. Local internet retailers have already cottoned on – Kogan is but one small business.

    The GST is just a sideshow from the main game of retailer survival. Retailers going out of business will still go out of business GST on personal imports or not. But any Government lowering the $1000 limit for GST on voters had better understand that we will vote them out if they even signal they are thinking about siding with retailers like Gerry Harvey and Solomon Lew.

    Remember, it isn’t survival of the fittest, but survival of those most able to adapt to change.

  • I always buy online from overseas. But i feel somewhat hypocritical when i get upset about aussie jobs being cut to be taken overseas. Double standards on my part.

  • Just spent $400 on ski gear in the US and happily paid $300 freight ( volumetric weight) to get $1200 of retail price goods here. I could care less about GST.
    The retail model has changed and customers can now decide what they want-themselves.
    Maybe if Government wants tax revenue they need to look at some of the tax international companies actually pay here and decide if they are actually helping the economy. …and why does an Indian company want to put up 8Billion in Queensland…because they love Australia?? Don’t think so…it is purely profit motivated.

  • The days of retailers riding roughshod over consumers have ended. Retailers – don’t waste our time by trying to justify your pricing models. We don’t care. If you can’t compete then close your doors and end your misery. Some of us have read the latest productivity commission report and are well aware that Australia’s overall “costs of employment” are on par or even lower than those of the US & UK and that productivity (output per $ of employment cost) is low.

  • If anyone is familiar with transfer pricing, I propose imposing a substantial duty on licencing payments for Intellectual Property.
    This is how multinationals transfer profits to tax havens using this mechanism, and it would allow local manufacturers to be more competitive with them. This wouldn’t be a cost that we (the public) had to bear, just more of the profits of companies like Apple staying in Australia.
    This is very much the case with digital products where there is no physical movement of items.

  • Opening up the global market was originally embraced by retailers because it meant greater access to products fro them.
    Now that retail has become a global market our Australian retail sector is stuck in an old mentality.
    Even small business in the USA are open to the idea of shipping internationally if you ask them. Would you expect the same from a store here – the chances are that it would be put in the too hard basket.

    The cost of living in Australia is stupidly high. Our homes are overpriced and the wages do not truly reflect inflation. In the mean time we’re being gauged with consistently higher taxes and very little to show for it.

    What the retail sector should be doing is pressuring the Australian Government into opening the gates so they too can parallel import from manufacturers.
    They should be focusing on training their staff to know the product they are selling. I hate walking into a store only to find that the questions I have for a product cannot be answered because “oh this isn’t my section” or “you should check the website”.

    While you’re at it how about revising the stock kept on the floor at retailers?
    I’m 6’6 and built like a tank, unless I want to shop at Lowes I am forced to source clothes from overseas. If I choose to buy from a designated big and tall shop I’m charged a premium for simply being slightly taller then the average Australian.
    Here’s an example of price gauging that I can put into perspective I picked up a 2XLT Nike Golf Polo in Hawaii 2 weeks ago – Cost $20, come home looking to purchase the same shirt – 1. impossible to find in my size, 2. cost $69.99 (at Golf World) for the same product. Granted I didn’t pay shipping but to ship 1 shirt by USPS realistically what are we thinking max $11 so my $31 2XLT shirt still came in $38.99 cheaper then the Australian counterpart. Even with GST it’s still cheaper.

  • Sales Taxes are taxes on individuals. While they offer an end price difference to the consumer, it’s still the individual who has a tax liability.

    If this gets too hard for retailers, governments will simply drop sales taxes and put income taxes up and welfare/pensions down to compensate.

  • The market should be left to its own devices. Charging GST on online imports is a form of tariff. Tariffs are short sighted attempts to create an inefficient market that will ultimately be detrimental to the masses – albeit its adverse effects are far less traceable than its apparent benefits on a superficial glance. Leave this alone! Let inefficient local retailers fail! The result is more people will be available to work in other local industries – keeping costs of those industries down – resulting in improved exportability of those products. This is how an efficient and self-regulated market should work.

  • If an AUS retailer has a clue, the product and the pre, during and after-sales service that I want, then I won’t need to go overseas for it. But the AUS retailer does not have a clue about the product. In most cases for what I want they don’t have it in stock and cannot get it for me when I ask, as I have to wait until they can make their bulk order to the supplier in a few weeks time.
    As for service, “your deity of choice” spare me. AUS retailer would not know service if it bit them on the @$$. Forget about pre-sales, sales and post-sales service. No-one that I have dealt with here has a clue. It is all about how much money I make. I understand that they need to make money, but upsetting me the customer does not make their bottom line any stronger.
    Suck it up AUS retailer. In the competition between AUS retail and WORLD retail – the victor is already WORLD retail.
    AUS retail you suck. If you didn’t we would not have to go overseas to satisfy our purchasing needs.

  • This is just another classic example of the greedy Australian Government pigs sticking their snouts in the trough. No one can defend this apart from the Pollie’s imposing it.

    What’s next? slugging Gamer’s with an import tariff too because the game downloaded from Steam came from a US server and is being imported into Australia?!

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