CHOICE and the Internet tax
CHOICE is urging the Federal government not to expand the GST to more online sales; at least not without first getting more information.
Australian retailers have been lobbying the government to start charging GST or some other tax to level the playing field between local sales and Internet sales from overseas. CHOICE has gone through the available information and shows that as a tax it would cost more to administer the suggested schemes than the Government would receive in revenue.
It does strike me that CHOICE is perhaps slightly missing the point. It can be argued that any scheme like this is about a subsidy, or protectionist barrier, for local retailers so it’s impact on Government revenues is not the main game. It would be different if the driver was revenue the Government felt it was missing out on, but this seems to be being driven by the retailers not the Department of Finance.
But it also strikes me that the retailers are missing the point as well. In my own experience the differential when I buy from overseas is often well above the 10-15% that a GST-leveling scheme would add to the cost. I recently bought a camera after much research: The lowest price I could find it for locally was $550; I ended up buying it from a supplier in Hong Kong for $280 and had it in my hands two days later – adding 15% to that would not have come close to making it competitive. Now obviously the differential on a book, for example, wont be that much but the point is an important one.
What local retailers need to do is get their online prices to be much more competitive and offer a service that overseas retailers can’t beat. If they wont do both those things then it’s going to take an extraordinary Government effort to support that lack of competitiveness.
Anyway CHOICE has an infographic explaining the Internet tax. Personally I didn’t find the infographic all that enlightening: It comes down to the core point that the research shows that we would be spending more money to collect the tax than we’d get in extra tax revenue. That’s good information and worth knowing, but at the end of the day I think it’s attacking the wrong pressure point in the food-chain. The retailers need to understand why people are buying from overseas – and the GST is only a small part of that.
Image: Excerpt of CHOICE infographic.
As you say the reason for the tax would be to help retailers compete with overseas/online retailers price-wise. Which seems to me fair enough. What strikes me as unreasonable is that it would give local retailers a large advantage convenience-wise. Consumers would be sucked into the customs clearance system, which is well known for being a massive pain to navigate. This would simply be a dead weight imposition on consumers, and the economy overall. Between, lessened price differential, quicker possession of the goods, a more certain guarantee, and not having to deal with customs, I think it would lately kill retail overseas imports.