http://www.abc.net.au/news/stories/2011/01/07/3108395.htm
http://www.skynews.com.au/topstories/article.aspx?id=559759&vId=2068628

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:

http://www.smartcompany.com.au/entrepreneur-watch/20110104-5-reasons-the-big-retailers-are-wrong.html

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?

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.

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
much.

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.

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 !

Pelican,

Thank you for the links in your opening post. The third link, which I repeat here in shortened format for convenience,
http://bit.ly/g9IXFC , 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 ( http://www.ambitgambit.com/2011/01/05/please-phone-me-gerry-harvey/ ), 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.

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.

Whilst I have little sympathy for retailers, there are a few points I would make.

1) 750,000 Australians rely on the sector for employment. These people DEMAND minimum wages. In the US retail staff are paid roughly half what Aussies get. Therefore harvey et al's business model has some inbuilt limitations that their competitors don't have.

2) Car sellers get this support. I want to know why its ok for the gov't to erect extreme barriers to privately importing a vehicle. A comparable vehicle in the UK can sometimes be less than half price.

BTW, the 3% figure is for ALL online sales. Overseas internet sales account for only 10% of that 3%. ie 0.3%. Weekend Australian Jan 8-9th

Thanks for the clarification PaulL regarding the 3% figure. I wonder how much that 0.3% represents in dollar terms. Yes, there are other factors like wages and conditions. There are many anomalies in the variations that affect the nature of global trade including standards of living for lower income workers not only in the US but in the developing world.

The US scores third highest on the Gini Score (behind Hong Kong and Singapore) indicating the third largest in income disparity. The problem is not the minimum wage but the degree of income disparity and the extent of profits in relation to fair wages and conditions. Many jobs in the US are barely a living wage and the number of working poor is much higher than in Australia.

http://finance.yahoo.com/banking-budgeting/article/107980/countries-with-the-biggest-gaps-between-rich-and-poor

Forrest where are you heading with the hidden agenda? The retail response seems nothing more than a knee jerk reaction to a potential reduction in profit? I had not seen Graham Y's letter - the response must be in the mail.

There was big kerfuffle within the Australian music industry on international competition but they were unwilling to take a cut in their own large incomes or bottom lines. Wages always seem to be the fall guy in relation to competition issues to distract from obscene profit margins.

There are certainly many issues in this debate and cutting prices does not seem high on the retail sector agenda as a means of competing. Huge mark ups are the problem in Australia for some products but others like the book industry work on a much lower mark up relying on a high turnover. Supermarkets also operate on lower markups but have the advantage of stocking essential items so turnover might fluctuate throughout the year but won't diminish due to international sales.

In principle it is not a level playing field when there are differing conditions surrounding imposition of GST on international sales. The UK and US have recognised this, I wonder if the Australian Government will address the issue or put it in the too hard basket.

Go to the online 'shops' of the entrepreneurs like Gerry Harvey who are complaining and you will see that they are dinosaurs.

Their 'problem' has sweet bugger all to do with GST and is rooted in their unwillingness and incapacity to adapt to the changed marketplace. Many of the local businesses they are own or are defending don't even give prices on-line and even when you read their paper trash-mail flyers they often rely on slightly changed names and models of appliances to avoid comparison and competition.

Fact is, the 'wholesalers' with their discount barns scoffed derisively at retailers in shopping centres for not being up with the times and now that they themselves are faced with competition from a superior business model they are bleating for guvvy assistance, socialists all.

*and is rooted in their unwillingness and incapacity to adapt to the changed marketplace. Many of the local businesses they are own or are defending don't even give prices on-line*

I have a sneaky suspicion that some of them are adapting, but in
a different way then you may think.

I bought a Sunbeam Cafe series food processor some months ago and
shopped around online. I can't even remember the name of the
online company. Lo and behold, when it turned up, it had a
Harvey Norman sticker on it. So I'd say that they either sourced
it through Harvey Norman or Harvey Norman are marketing online under
different names.

There are good reasons why Harvey Norman would not publish all
their prices online. Their's is not a lowest cost discount dealer
model of business. They would rely on some customers just walking
in the door without shopping around too much and paying the price
on the card. That is where the healthy profits are.

So if Harvey Norman were to market online, it would make good
business sense to market under another name, so as not to cut into
their bricka and mortar profits. That was my conclusion, when the
processor arrived with their label. Perhaps somebody forgot to
remove it.

I'm fine with big retailers and big profit margins - if their business model works, I don't object to their success and I certainly don't object to them grabbing every cent consumers are willing to pay. After all, if I was a retailer, I'd hope to make big profits for myself as well.

What I do object to, though, is the stance Gerry Harvey and his less vocal partners are taking. In essence, they are looking to protect their business by implementing measures deliberately designed to make things less affordable for us, the consumers. He doesn't want the GST to apply to online imports because the government needs - or is entitled to - the money; he wants it so the prices go up and we are forced to spend more money online or shop the old-fashioned way. He hasn't even bothered to disguise this fact. What this means, then, is that he wishes to worsen our lot in life in order to safeguard his own.

Hopefully some of the legal experts can help with this question:

If I make a purchase online (say, as I did recently, I bought a cycling jersey from the USA), where does the sale take place? If, as I had assumed, it takes place in the USA, can the government charge me GST on it? As for import duty (or whatever it's called), surely if they can tax me on a cycling jersey from the USA, they should also be taxing me on any souvenirs I bring back from an overseas trip?

pelican asks, in response to my post of Sunday, 9 January 2011 at 3:48:22 PM:

"Forrest where are you heading with the hidden agenda?
The retail response seems nothing more than a knee jerk
reaction to a potential reduction in profit?"

If I may deal with the second question first, I simply observe, courtesy of the clarification posted by PaulL as to the GST-exempted overseas online transactions constituting not more than 0.3% of retail sales, that the potential reduction to Australian off-line majors' profits is even more miniscularly small than that.

So far as my (few) overseas online purchases are concerned, Australian retailers, online or off-line, are not even in competition for these sales. The products I buy online from overseas suppliers are products that are simply not available from any Australian retailer. There is no direct price comparison being made: I am simply buying therapeutic and dietary supplements relevant to alleviation of a medical condition from endorsed reputable overseas suppliers in a situation where no local suppliers exist.

If, as a consequence of this campaign that Gerry Harvey has been so foolish as to front, I have to pay GST in addition to what I presently pay for these supplements, then that is by an equivalent amount so much less discretionary income I will have available to spend in the Australian retail sector for my other requirements. How smart would that achievement be on behalf of the local retailing non-adapters, Gerry?

I suspect many of the presently GST-exempt overseas online purchases would fall into a similar category to my own purchases. The local retailing industry isn't even on this playing field to be concerned as to how 'level' it might be. That is where this minimally and grudgingly quantified campaign is so deceptive. Prima facie, it makes little sense.

That is why I look for a hidden agenda. As to where I am heading with it, the answer is: wherever any evidence that stands up takes me. This is OLO, not the MSM. Others' substantiated ideas are most welcome, pelican.

A couple of points
- It does seem like it would be very difficult to police this for small items.
- If the big retailers really care about a level playing field then they would not take advantage of buying power to undercut smaller competitors (or to make a greater margin than smaller competitors) - somehow I doubt that Harvey Norman pass up on any competitive advantages that their size gives them.

R0bert

Good point RObert. Some of the larger stores sell certain products at wholesale or under wholesale price to get customers in the door to buy all the other overpriced goods. One retailer (books) I spoke to said it was very hard to undercut the big guys who have bulk purchasing power.

Forrest I tend to look for hidden agendas too. Some years ago I ran a business that sourced only Australian products but ended up importing one product line that does not exist in Australia except for one distributor who overcharged to bu**ery. I figured I may as well import the same product that they were at much cheaper prices. There were no Australian equivalents. Interestingly at that time (1999/2000) there was a still a small import tariff applied.

Looks like small retailers are now getting in on the push for a GST on online goods.

http://www.smh.com.au/business/small-retailers-join-web-tax-push-20110109-19jt5.html

Otokonoko I have no problem with business making profits - I do have an objection to massive profits if they come at a cost to employees (less than a living minimum wage as in the US), the environment, exploitation of the poor, health risks and skewed competition policies such as the imposition of GST on local online sales and not on all sales. Dymocks was planning to take their online component offshore to avoid having to charge GST which of course impacts on the jobs in Australia. Dymocks has shelved the option for now.

I suspect the GST applied to OS online sales will be negligible if the tax applies to purchases over $100AUD given most sales are for smaller product items.

Look as someone with allot of retail experience I can clearly see that the price of manufacturing has increase on products because not of material but a better cut.

I recon that people should be entitled to shop tax free online as there is the fact that this is not a physical shop, not customer service is involved and all you need is stock and a website nothing more.

This is a benefit to online companies and it is cost saving and does not require the staff or expense of an outlet that is passed onto the customer.

If everyone shopped online everything would be cheaper..

One aspect of the online shopping debate that has not been broached so far, is that a lot of the aggro exhibited by consumers to the Retail Coalition may be a result from the anger that people experience when they realise they have been, or are being, manipulated.

My personal beef on this score is that many film companies release movies on OS markets but not here. Even worse is their nonsense of region codes etc that is usually a cover for differential pricing.

I am even more concerned with the efforts that are being made to limit and censor our individual use of the internet. It is something that has empowered people to 'find out for themselves', a right that I take very seriously indeed!
Epsilon