Currently Australians can purchase items online from overseas retailers GST free, provided they stay below the $1000 threshold. This means that overseas retailers automatically have a 10 per cent discount advantage over local businesses, and the Australian retail community has finally had enough.
Bernie Brookes, CEO of Australia’s biggest department store Myer, along with Harvey Norman CEO Gerry Harvey, joined together yesterday to put political pressure on both federal and state treasurers to address this problem. The $1000 threshold has been a loophole detested by domestic retailers for years. Now finally Australian retailers have now reached the point where they say they may be forced to ship in products via New Zealand to match the unfair price advantage given to foreign websites.
Federal Treasurer Joe Hockey will today meet with state treasurers to discuss the loophole, amongst other issues. Local retailers are hoping that they will decide to lower the threshold significantly, or to remove it completely, putting foreign online retailers on even footing with local businesses.
Mr Brookes explained that because of the loophole, “over $800 million [is] going amiss that could be put into the state governments for schools, for extra police and to be able to support the local community.” He said that if the government did not take immediate action over this issue, it risked local retailers exploiting the loophole themselves. “Somebody like Woolworths or Coles, us or David Jones could supply the products out of New Zealand and supply the product for 10 per cent less, and that could well happen if the government doesn’t close the loophole.”
I’m a big fan of online shopping. You don’t have to leave the house, carry heavy bags or suffer the disappointment of shop after shop not carrying the item you need. And, best of all, online shopping is cheaper, especially if you buy from overseas.
Yet, every time I click the ‘Buy’ button, I feel a little pang of guilt. Guilt that I am not supporting Australian manufacturers, companies or local businesses. That my money is supporting someone else’s economy. Not just occasionally, either – most of my shopping dollars are spent online and overseas. It’s not a good feeling.
One of the biggest arguments the previous government made against collecting GST on items under $1000 was that it’s simply too difficult to manage. There is the issue of how to collect the tax, and the cost of determining how much tax should be paid on each individual parcel. And yet Europe, the UK, Canada and the USA all seem to manage just fine when it comes to collecting tax on items purchased online from other countries.
As an online shopper, I support lowering the GST threshold on online purchases. Yes, I know this means my shopping is going to go up by 10 per cent. Will it stop me shopping online? No. Online shopping has two important points in its favour which are unrelated to price. First, Australia simply doesn’t get the range of products enjoyed by other regions such as the Americas or Asia. Shopping online gives you access to a wealth of clothes, gadgets and gifts you wouldn’t otherwise have on offer. Secondly, it takes the guesswork out of the equation. When you want a very specific item you could spend all day running around town trying to find what you want. Or you could type it into Google and find exactly what you are looking for in seconds. I’m willing to pay 10 per cent more for that level of convenience.
Local shops, shopping centres and markets are great if you want to browse. But when you want something specific and you need to find it fast, online shopping wins the race every time. I think that Australia’s treasurers would be surprised by how accepting Australians will be of a lowered (or abolished) GST free threshold on imported goods. Keeping the convenience of worldwide online shopping while still supporting Australia’s economy? I think that’s called having your cake and eating it too.
What do you think? Is the whole point of online shopping that you avoid GST? Will you still shop online if the prices stop being so much cheaper? Or do you think that lowering the $1000 threshold is a good idea?