26 September 2013
New research by CHOICE reveals that the campaign by Australian retailers to blame the GST low-value-threshold (LVT) for the industry’s woes is based more on fiction than reality.
Goods bought from overseas do not attract the GST if they cost less than $1,000 because of the principle that governments should not spend more collecting a tax than they raise from it.
Some Australian retail groups have blamed this threshold for sluggish sales and have been leading a campaign to lower it.
However CHOICE surveyed online shoppers and found only 12% nominated saving on “paying duties and taxes by purchasing on overseas websites” as a reason for shopping online.
“We continue to hear that the GST low-value-threshold is wreaking havoc on the bricks and mortar retail industry, however the reality is that few consumers factor this into their decision to shop online,” says CHOICE Chief Executive, Alan Kirkland.
“In fact 73% of online retail sales in Australia are made on Australian websites* which do charge GST – so this is not a decisive issue for consumers.”
The CHOICE survey found that although many Australians shop online to get the best bargain, their main reasons actually relate more to convenience than price.
“The top reason Australians shop online is so they can shop at the hours that suit them, followed closely by the convenience of getting products delivered to their door.”
For consumers that are seeking a bargain on overseas websites, most claimed they save much more than 10%.
“68% of consumers who buy from overseas websites to save money said they save more than 15%, while 43% said they save over 25%.”
“The size of these price differences is not surprising considering our research for the IT Pricing Inquiry last year found that Australians are paying around 50% more than US consumers for computer hardware, software, games and digital music.” **
“With these levels of savings available, it’s comical to suggest that a 10% GST is having a significant impact.”
CHOICE supports a level playing field for Australian retailers, and believes the threshold should be lowered if it can be done cost-effectively and efficiently, without burdening consumers with massive fees, delays, and red tape.
“Otherwise it’s just a deadweight loss to the economy, with the inefficient costs of collection – whether paid by government or directly by consumers – outweighing any benefits, and placing even more cost-of-living pressure on households.”
“The retail sector is facing some real and significant challenges, but the low-value-threshold is simply not one of them.”
* NAB Online Retail Sales Index, Indepth report – July 2013
** For more information see choice.com.au/itpricing
Note to the editor – recent comments calling for the GST low-value-threshold to be lowered:
- ‘‘And the largest component of that [retail job losses] is by allowing consumers to buy online goods that we have to pay duty and tax for and that they don’t have to, we are the only western country in the world that allows that and it’s cost thousands of Australians their jobs and we would urge the new government to look at that quick haste.’’ - Mark McInnes, ‘Solomon Lew blames 'inept' Labor for retail downfall’, The Age, 17 September 2013
- “The new Government has access to more than enough information on the issue to allow a quick decision on a reduction. There really is no excuse not to fix the GST loophole; even the previous Government said it should be done and now is the time to reduce the collection amount from $1,000 to international levels of around $20” – Russell Zimmerman, Australian National Retailers Association, Media Release, 18 September 2013
- CHOICE conducted a comprehensive survey among 1,000 Australian consumers who personally use or have content consuming devices such as computers, tablets, and smartphones.
- The online survey was conducted from July 2- July 12, 2013. The participants were recruited from the Lightspeed Research panel and the results were analysed by The Acid Test and CHOICE.