Retailers call for GST review as online sales boom

By Brett Winterford on Jan 4, 2011 10:46 AM
Filed under Sales & Marketing

Lobby group pushes for an "even playing field".

A group of Australia's largest retailers has called on the Federal Government to amend its taxation laws in the wake of strengthening competition from online merchants hosted overseas.

In an open letter to the Government [PDF], local retailers complained that foreign etailers enjoyed GST-free sales on goods and services sold for less than $1000, whilst local bricks and mortar outlets were taxed for a purchase of the same value.

The retailers called for the Government to lower the GST-free threshold on goods and services purchased online from overseas.

This would "create a level playing field where the same rules apply to everyone," the letter said.

"That means everyone is exempt from GST and duty charges for purchases less than $1000 - or everyone has to pay GST and duty."

Led by Myer, the signatories to the letter included David Jones, technology giant Harvey Norman and book retailers Angus and Robertson and Borders. In total, the complainants represented 2,211 retail stores, employing more than 76,000 Australians.

Bricks and mortar retailers have struggled as the Australian dollar has climbed against the U.S. dollar and Euro, with more and more sales heading direct to manufacturers or retailers based overseas.

Retailers have also struggled against restrictions on trading hours imposed by State Governments in conjunction with trade unions.

In South Australia, for example, stores were closed for five days during the Christmas and New Year period, much to the angst of both industry [PDF] and shoppers.

The Myer-led protest letter also noted that the rise of the smartphone had led to huge growth in online retail at the expense of physical stores.

"We agree with our customers that online retailing is a wonderful convenience that is here to stay. We currently offer our customers online services and we want to offer more, but we are disadvantaged by an Australian tax regime that offers overseas businesses a better deal to the detriment of Australian retailers and consumers who shop locally," the letter said.

Electronic Frontiers Australia stepped into the debate today to ask that the Government not pander to the retailers' lobby group without canvassing the opinion of all stakeholders - especially consumers.

Any move to reduce the GST-free threshold "would hurt Australian internet users and consumers," said EFA Chair Colin Jacobs. "Until a solid case is made that the economic benefits would outweigh the advantages in choice, price and convenience to shoppers, we don't think the status quo should be changed.

"The rise in online commerce has significant benefits for Australians, and will only become more important," added Jacobs. "With the NBN on the way, any changes targeted specifically at hindering online shopping should only occur after a lot more study and consultation."

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Retailers call for GST review as online sales boom

11 comments in this discussion

"If online sales was really the problem, why aren't the likes of JB Hi-Fi and Good Guys suffering? Could it be because people are better educated in what they want and are better equipped at ..."

By lguan

Tags

retail, gst, threshold, myer, harvey norman, etail, online, sales, efa

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Comments: 11

Click Jan 4, 2011 11:39 AM	I agree with these retailers that the "playing field is not level" and it is indeed unfair to Australian companies. December 2009 I ordered some books on www.borders.com.au and when they arrived they had been invoiced in USA with no GST. Since when does the Australian taxpayer need to subsidise and American company? The less tax collected the higher GST will need to be on other goods to pay for tax funded services. Wake up and level the playing field! All pay GST or all do not pay GST. If this continues Australian retail and Online companies will need to register overseas to level the playing field!
gnome Jan 4, 2011 11:44 AM	All the P&W from the big guys about GST on personal imports does not even mention the main reason people buy online. For obvious reasons, items are cheaper online than they will be through the channel. In most cases the difference is a lot more than the GST, so even imposing it on every purchase will have little effect on the trade. And the dollar has nothing to do with it. On a given day the channel importers and the personal importers will pay exactly the same rate of exchange. Well, nearly the same - the channel guys should be able to get a better rate due to volume.
equipt Jan 4, 2011 1:38 PM	Yeh I have noticed its Harvey Normans and the other giants but did anyone stop and consider the little guy the small retailer for years now Harvey Normans and the Giants have been pilliging from us and know one considered our delemma when a notebook was sold next to nothing and goods sold under price to reach there rebates from manufacturers. Serves you right Mr Harvey Lower your prices and maybe we will continue to purchase from the good old bricks and Mortar Remember what goes around comes around. Do you really care about the average family who is struggling to make a dollar or you care about your back pocket. If a person whats to save it does not matter where they buy we should be free to shop where ever without restrictions.......But answer me the final question as mentioned when the dollar is down what will happen then?
pmc777 Jan 4, 2011 4:20 PM	I think the problem is bigger than GST itelf. I agree with equipt that it is very hard to feel to sorry for Mr Harvey, but I have seen comments on other forums where people are justifying online purchases because they believe Aussie retailers are overpriced. I believe the bigger problem is with the distribution of goods to Australia. Manufacturers and distributers are seemingly charging higher prices here than in other countries and this has not changed dramatically since the dollar has risen. I have seen many examples of goods that I can buy from overseas online reatilers for less than I can buy from my Australian Disties before GST is added. I think Myers and Harvey Norman etc. get much better buying power than the rest of us so are unlikely to hear them complain about it.
Francis Jan 5, 2011 3:02 AM	This whole thing is far bigger than the GST and if I remember correctly tax on the goods would have most probably been paid in the country of origin. While this may not necessarily be the case in law, from experience on small purchases it is too much bother for the overseas retailer to file the paper work to claim the Tax rebate so they often do not do it. So to impose a 10% GST on top would be double dipping. Now while I purchase the odd article overseas I am not a great user of the Internet for purchasing goods but let me give a couple of personal examples. I had an a Briggs & Stratton Ignition Module on my Lawn Mower fail. To purchase a new one from a mower shop in Sydney the cost was $140 odd and around five days delivery from Melbourne. So I E-Mailed a friend in Canada who purchased a new one for me and the landed cost was half the cost of purchasing one here and that included Canadian Tax. Not only that but the delivery was three days door to door. If I had shopped around I could have even got it even cheaper, mail order from the USA. I also had to purchase a set of brushes for the Starter Motor on another B & S engine Price $68 I could purchase via mail order complete motor for $50 US. Next Microsoft Windows 7 Home Premium purchased on line from the USA is around $80 less expensive delivered to your door. This equates to around a 30% saving. The only logical conclusion is that 10% GST is not the answer as in these few examples it would still be far more attractive to purchase overseas. To Mr Harvey let me say this. I shop around and I always try to buy locally as the effort of going overseas is often to much hassle and on some items such as a Printer the freight cost makes the transaction too expensive and as far as warranty is concerned that's another problem still. Further, however as an example the last printer I purchased which was in the $300 range was $50 more expensive in his shop than it was elsewhere. In conclusion let me just state that before whining about the price of overseas purchases and GST, these retailers should look in their own backyards first, as tax as shown in the above instances is not the answer.
Francis Jan 5, 2011 9:41 AM	On top of what I have already written I would like to ask Mr Harvey and friends this. I have just read where new car sales are also down. How many New Cars were ordered overseas via the internet? Could it just be that this is not just a Retailing slump? I also read where Wesfarmers who own Bunnings Hardware are joining Mr Harvey's band. What a great example that is, they hardly stock an Australian made product putting people in manufacturing in this country out of business and their workers out of a job. If we are to have a level playing field lets include manufacturing in the mix as well and make this push in Australia's interest and not that of a few lucky Billionaires.
spook1958 Jan 5, 2011 10:26 AM	A level playing field Mr Harvey? Okay, I agree. Small retailers should get the same terms you get from suppliers, like 60 day and 90 day 'sale or return' so that small retailers can carry larger levels of stock. Smaller retailers are hurt harder than larger retailers by online sales because we cannot carry stock without paying for it. You have many advantages Mr Harvey, that we can only dream of, yet you cry foul first and loudest while we adapt to our customers needs. Why don't you try that?
plhau98 Jan 7, 2011 1:14 PM	Must have missed something. Distributors do give you a level playing field for purchases of the same products in the same quantities. Discounts are applied to large quantity purchases. But if you purchase the same quantities that Harris Tech and Harvey norman purchase, you will be running up a stock holding in the $$ millions, which no retailer ever wants to do. As for sale or return, these terms are part of a negotiation process between the distributor and the large retailers. There are products that cannot be returned, like software, and this is where the distributors make their extra money. If you can convince the manufacturers that you are a credible risk, you can buy on consignment, but remember, at the end of the day, it is not the distributors that knock you back, or the manufacturers, it is the insurance companies that they employ who have the final word on your account terms, credit limits and whether the risk is acceptable.
Macca Jan 8, 2011 9:41 AM	What both articles do not mention but is highly relevant is that someone purchasing online will normally still go into the big retailers and have a look at the product and expect the same service in being demonstrated the product and finding out further information about the product before then buying online to save a dollar. Therefore the big retailers incur this service cost even though the online consumer has no intention of buying instore What people must remember is that retailers have rent, electricity, wages and other costs to pay for and this is why the price is not the same as well as the fact that retailers are purchasing from Australian distributors who also employ Australian workers. Sure the big retailers could sell products for cheaper than online competitors if they moved to an online model and slim lined their business but as Australian consumers do we really want to purchase goods without first being able to see them with our own eyes. Also what happens if you don't like something after you bought it, a lot of people will exchange it within the first week for something else, try doing that with an online retailer without incurring difficulty and costs
Francis Jan 8, 2011 11:07 AM	@Macca. You make some valid points, but there is another dynamic working here. I refer you to the Ignition Module for my lawn mower in the article above. This happened around three years ago when the exchange rates were a lot different to what they are today. The module I purchased went right through the supply chain from Briggs & Stratton to a store in Canada where my friend purchased it "RETAIL". He then sent it to me via DHL and it was still less than half the price of purchasing it locally which includes freight Exchange Rate and Insurance not to mention Canadian Taxes. When I showed the invoice etc to a couple of shop owners here, they were somewhat annoyed, for as they said "We can’t even buy the same article from Briggs & Stratton here for anything like that price". I believe them as I knew these people personally as I once worked in the Industry. As for Mr Harvey, he would buy a hand full of Lawn Mowers and sell them as "Loss Leaders" In other words he would sell them for less than cost to create an impression that he was cheep and as a consequence specialist Mower Shops were expensive. This did enormous damage to the specialist shops. Where are these specialist shops today? Many have gone to the wall so where do you take your mower for service or repair? Not to Mr Harvey as he does not service them. I am not in the habit of buying anything over the Net but when it is a trusted brand name and the price is half that than buying locally you do not have much option. Frankly Mr Harvey, Mr Lew, Mr Myer and Mr Bunnings et-all need to check their margins and supply chain because if they are not ripping us off someone sure as hell is. 10% GST is nothing but this campaign has sure as hell got me and a lot of others wound up to the point where we will not be visiting these shops ever again. It is Just Greed. Like the “Loss Leader” Mowers were. Gentlemen, remember for every reaction there is an equal and opposite reaction. Further, What about Australian Industry which you have successfully destroyed. If we are to have a level playing field then they have to be part of the solution, instead of just pillaging our natural resources instead.
lguan Jan 11, 2011 12:35 PM	If online sales was really the problem, why aren't the likes of JB Hi-Fi and Good Guys suffering? Could it be because people are better educated in what they want and are better equipped at researching their buy? The consummerisation of IT led to the death of many mom and dad shops and saw the emergence of specialist resellers. Gerry Harvey thought he could cash in on the consummerisation and convergence of IT and electronics and keep the sales rolling like it once did in the 80s/90s. Times have changed, customers are either buying/researching online or going back to specialist resellers with their IT wants. Big stores like Myer and DJ might want to look in JB HiFi for their customers. As for clothes, the emergence of cheaper clothing stores, factory outlets are equally responisble for the decline of clothing sales in brand name stores, as online auction house eBay. Cheap manufacturing in China of everything from clothes to IT goods, is probably as much to blame as online sales. GST wont save these stores, they need to look at what their overseas counterparts are doing and change their business model. As Bob Dylan once said the "times they are a changin'" get off your butt Gerry and do some research find out what customers want - i.e. ONLINE CAPABILITIES. The 80s/90s way of going into one store for all your needs is dead - people are better educated and have cheaper options - that is your real competition - and you can't charge extra for that!!!