Today in Canberra a special meeting of State and Territory Treasurer Friends (otherwise known as the Standing Council on Federal Financial Relations) will be hosted by Federal Treasurer Joe Hockey. And what will our Treasurers be talking about over catered lunch? Well, for one, their fight against our right to party with online shopping.
The current exemption of ‘overseas-purchased goods and services which cost less than $1000’ from the 10% Goods and Services Tax (GST) is considered very high on the agenda. This comes after an ever increasing number of Australian retailers have added their voices to the plea to lower the threshold; generally, local retailers are calling for it to be brought down to cover any product or service over $20. Also backing this call are the state and territory governments, who say they are losing out on crucial revenue (estimated at $1 billion per year), which could be generated and distributed for reinvestment in public services.
Harvey Norman Emperor, Gerry Harvey, has said “This is totally unfair” but also claims that due to majority of overseas items being small consumer goods, like clothes, it DOESN’TEVENMATTER – “It won’t make any difference to us, but it is totally unfair.”
Just last week, Premier Investments CEO Mark McInnes spoke about the exemption and how it would force Premier, who own Just Group, to start cutting jobs (who’s flying this table of $10 novelty tees?!): “We don’t want to be going about cutting jobs, but obviously if leakage continues in main street Australia, it won’t just be us, all retailers will be faced with that situation.”
One of the key issues that has stopped this change in the past is needing to ensure that the cost to implement the tax collection will not outweigh the revenue generated. Jay Weatherill, the South Australian Premier, has said there already exists a unanimous agreement that a change needs to be made but they “aren’t yet at reaching an in-principle agreement about” exactly what it will be.
NSW Treasurer Mike Baird has said “No-one envisaged when the GST was first established that online (shopping) would become as popular as it is.” According to Queensland Treasurer, Tim Nicholls, online retail sales are growing at a rate of 15% per year, and while “It does show in the first year or two that the costs of collection are higher than the revenue generated…the trend gets much more positive the longer you go.”
The Treasurers™ will consider a range of models and come back together at the end of March to start making decisions. In an interview this morning Baird said “I don’t think we’ll be in a position that we can finalise arrangements but I think that there’ll be a clear understanding it does raise revenue greater than the cost. Once that’s established it’s just a question of when; not a question of if.”
On the other side of the discussion are consumer advocates who argue that the proposed changes, that they have labelled the “Internet Tax“, which purportedly aims to aid the domestic retail sector, ignores the cost to consumers and that a $20 parcel would end up costing more than $35.
Director of campaigns at CHOICE, Matt Levey, said yesterday that:
“Australia does not need a new tax on the Internet designed to prop up the local retail sector, hitting consumers with costs and delays, and dragging down our competitiveness. We continue to hear arguments that states are being denied hundreds of millions of dollars in GST revenue because of the $1,000 GST threshold on imported goods, but this glosses over the substantial expense of collecting the tax without reforms to parcel processing.”
He went on to say that “Bizarrely, the ‘internet tax’ would not even address the main reasons Australians shop online overseas, which have nothing to do with the GST.”
And a lot to do with laziness.
It is worth noting that there are now growing number of international retailers, like TOP SHOP, ASOS and now H&M and Uniqlo, who are setting up both bricks and mortar and dedicated Australian sites to cater directly to the Australian market; which, besides capturing all the thirsty Aussie consumers is also done with the aim to preemptively avoid any potential sales slumps seen once a new tax system is brought in.
It is generally felt that consumers will not be psyched on this development, with Baird saying it best when he said to reporters this morning: “I don’t expect to win a popularity contest.”
Title image from ASOS.com
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