Challenge to bricks'n mortar stores is technology not tax


CHOICE calls for commonsense in online GST free debate

CHOICE says the current debate about reviewing consumers’ GST-free access to goods bought overseas through online and other channels is about new forms of competition and the appreciation of the Australian dollar rather than tax rules.

The consumer group says that changing the GST-free threshold on imported goods worth less than $1000 because of exchange rate fluctuations would be poor policy. In the meantime, online price competition is likely to intensify and Australian retailers will remain unprepared.

CHOICE acknowledges there is a distortion from imposing GST on local purchases less than $1000 but not equivalent online, however the question is whether the benefits from removing that distortion outweigh the additional costs of compliance.

In February this year the Board of Taxation, after reviewing arguments on this issue, came to the conclusion that it is “not administratively feasible” to reduce the low value import threshold.

The Board also noted there were other costs involved with importing online goods that diminish some of the savings. These include costs of shipping and handling and some risk in terms of warranties, after sales service and the potential non-supply of goods for which payment already has been made (Review Of The Application Of GST To Cross-Border Transactions; a report to the Assistant Treasurer, February 2010. Available at www.taxboard.gov.au).

“The main driver of competition now affecting the bricks and mortar retailers is much more to do with the take up of new technology and the way it liberates consumers from traditional ways of shopping than anything to do with the GST or the exchange rate,” said CHOICE spokesman Christopher Zinn.

“Some retailers have decided not to operate online, and their decision should be judged in the marketplace. It should also not be forgotten that a higher Australian dollar reduces costs for local retailers as well. Unless there’s overwhelming and immediate evidence of widespread detriment to competition in the retail sector, especially the impact on smaller shops, we think it’s too early to consider change.”

The ACMA yesterday reported that 68% of Australians using online commerce bought mostly from Australian sources during the last six months. The top reasons they gave were supporting local businesses and having greater trust in local suppliers.

CHOICE says rather than seeking GST rule changes, Australian stores need to focus on their comparative advantages to win over consumers and, where possible, match competition.

These include: face-to-face sales advice; building trust for repeat business; the convenience of taking goods home immediately; fairer returns policies and superior after-sales service.

MEDIA CONTACT:

• Ingrid Just, CHOICE Spokesperson/Media Manager: 0430 172 669
• Christopher Zinn, CHOICE Director of Campaigns and Communications: 0425 296 442

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