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The Forum > General Discussion > Online Shopping and GST

Online Shopping and GST

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Currently if you purchase a product from an overseas online retailer you are only charged GST on purchases over $1000 AUD.

Recent news reports reveal high profile Australian business are pushing for overseas purchases to attract a GST in the interests of a level playing field.

On the face of it, it does seem unfair for local business who must charge a GST on goods and adhere to consumer protection regulations while international sellers are exempt.

A counter-argument here:

Summarised as:

1. Cutting the threshold (currently $1000) won't work as most online sales are for products like CDs, DVDs, books etc that are under $100.

2. Online sales only represent 3% of retail sales - hardly enough to cause job losses and business closures.

3. Avoiding GST is not the reason that people shop online it is usually made up in any case by shipping costs. The fact is many goods are cheaper OS.

4. The retail giants like DJs, Harvy N, Myer etc who have not had much success with online shopping will not be affected by those who have for big ticket items still sell well in-shop.

5. Consumers will remember that Aussie businesses forced them to pay more for online purchases by paying GST (if successful) and this bad PR will have detrimental long term effects.

While I concede on some of the points raised above, I believe in principle in a level playing field. Gerry Harvey has received some quite unfair criticism on this issue even though I suspect Harvey Norman would be less affected compared to other retail sectors. Dymocks recently raised concerns about the disadvantages of GST for online book sales in competing with international companies.

Countries like the US,UK and Germany charge a tax on all online sales. In the UK I believe it is on all online sales over $18 (not sure if it was pounds or AUD quoted).

Apparently the most popular online purchases are women's clothing, shoes, books, handbags,CDs and DVDs.

What do others think?
Posted by pelican, Friday, 7 January 2011 6:58:34 PM
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I think this has more to do with declining sales in general and the need to snatch back the markets that have been lost to internet shopping. A three percent loss to on line shopping may not seem like much, but amounts to many millions which the large traditional retailers no longer get.

Retails sales will continue to decline as disposable income declines. Disposable income will decline this year due to the oil crisis taking shape, increases in interest rates at a higher level than that set by the reserve, increases in utility costs and food costs.

Nonetheless... with or without gst, consumers will increasingly look to get the best.

I'm actually in support of gst for overseas shopping. The reason being is that they already overcharge Australians for goods and will merely reduce the cost accordingly to undercut Australian retailers.

For example, you have to wonder why songs cost more on itunes for Aussies than they do for the US market when the dollar is at parity... and that's before gst. Well, you don't really have to wonder. Elasticity of supply and demand looks to find the sweet point where retailers seek to find the highest possible price they can charge without loosing out in production or over supply.
Posted by George Jetson, Sunday, 9 January 2011 9:42:10 AM
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Pelican, in principle both you and Gerry are correct. But public
sentiment does not work that way. In principle, the banks were
correct too, as the banking inquiry showed. That did not help them

I think that the large retailers are only just coming to terms with
the reality which online shopping is going to present them with,
mostly from competition within Australia, for airfreight postage
to Australia is not cheap.

Harvey Norman etc would be in a bit of a bind, as in my dealings with
them, they seldom tagged anything at their stores at their cheapest
price. You'd have to haggle with them, to get a better deal. Now
all of a sudden, with a couple of clicks, consumers can compare
the price of something, between many retailers across the country.
So those high margin sales, where the big profits are made, could
soon fade away.

I'm a big online shopping fan, but price is only one consideration.
I've tried to buy some science books locally, only to be told that
it would take 4 months, at a very high price, to obtain the book.
Amazon had it here in 10 days.

Rivers do a good job selling clothes online, companies like those
will present the bricks and mortar retailers with ever more
competition. Deals Direct again do amazing bargains, but from right
here in Australia. These are simply more efficient retailing
systems, then our old fashioned high cost ones.
Posted by Yabby, Sunday, 9 January 2011 10:27:14 AM
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I can place an online order from London, Los Angeles or Hongkong on a tuesday & have it in my hand on friday for up to 30% less cost. If I order the same thing from my nearest australian outlet it takes an average of 10 days & at greater cost. So, what is the alternative to support local business ? Harvey Norman led the way to creating a consumer society being in debt up to its eyeballs. We should not receive goods until paid for or at the least organise a proper loan. This business of getting your $2000 plasma Tv now & pay next year is nothing short of evil. The proof is everywhere. Our governments are hitting us with too much tax to compensate for their incompetence. Obviously half the population & two independents approve of this. Hail democracy !
Posted by individual, Sunday, 9 January 2011 12:19:17 PM
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Thank you for the links in your opening post. The third link, which I repeat here in shortened format for convenience, , is most useful. The fifth comment, by one Dexter Clark, to that news item, '5 reasons the big retailers are wrong', concludes:

"If one was cynical, one might suggest this is
a pretty effective [$200,000] marketing campaign
for these guys as this story was the lead story
on quite a few news programs last night!"

I am cynical.

There has to be something else going on here. The incompetence and deception with which the ostensible campaign, one as to seeking a so-called level playing field for the GST-paying big local retailers to compete with non-GST-paying online suppliers, has been waged is breathtaking.

That's not just my opinion. GrahamY wrote an open letter to Gerry Harvey on his blog, Ambit Gambit ( ), offering to run a better-targetted campaign, but I don't think he got a call back. It seems Solomon Lew's favoured agency had the inside track for that job all along: Solomon Lew has a reputation for being an extremely astute businessman, and I doubt an agency favoured by him would heedlessly make fools of themselves unless there promised to be compensating advantages. Solomon Lew owns a number of well known brands that are sold by the big retailers.

So perhaps one of the more obvious real concerns of the largely off-line bricks-and-mortar major retailers in Australia is exposure of the extent of their mark-ups to the buying public in comparison to those of experienced online marketers. However, even if it were to be practically possible and financially viable to extend the collection of GST to OVERSEAS online suppliers, that would offer only a miniscule solution to the online-retard major retailers' foreseeable woes.

Why do I expect to find Steven Conroy's fingerprints all over this attempted rip-off of Australian consumers? NBN, internet censorship, and proposed archiving of all internet traffic: all hot suspects, IMO.
Posted by Forrest Gumpp, Sunday, 9 January 2011 3:48:22 PM
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Being consumed by self-interest the entrepreneurs are unconcerned if the cost of administering and collecting the taxes exceed the amount collected.

Then again they are not concerned if their own business models are dated and inefficient.

Over the years I have read hundreds of posts complaining about poor service and overpriced products in Australia. The substantial majority of the buyers said they would have bought from a local distributor if given even a remotely fair deal. Also, there is evidence of gouging and restrictive trade practices. For instance, local distributors take advantage of their distribution rights to jack up prices and even refuse promised world-wide manufacturer warranty if the product isn't proved to be bought from them. There is evidence of local importers attempting to lean on their overseas suppliers to stop sales to Australian on-line customers and sometimes being successful.

Buyers sourcing their products from overseas already suffer the high transport costs for single purchases and the extras for credit card purchases. Together with that they risk non supply and warranty issues. Australian distributors must have really poor business models if they can't meet or beat that.

It has little to do with wages, there are products I regularly buy from O/S that are US made and sold and I can get them for a substantial reduction in three days whereas locally I would have to order and it could take months, suiting the local distributor's management priorities, not the customer's.
Posted by Cornflower, Sunday, 9 January 2011 5:05:53 PM
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