No more GST-free shopping for Aussies: but it is the wrong fight?

It looks like Gerry Harvey has won the fight he picked over two years ago to have the GST imposed on goods purchased online up to the value of $1000. State and federal leaders agreed in principle yesterday that the GST should be expanded to include “goods valued at $1000 purchased online” which it has previously not covered, to the chagrin of Mr Harvey who has spoken regularly of the disadvantage he felt placed in against online competition in the smaller electronics marketplace.

The owner of Harvey Norman retail chain has become the face of the battle that consumers didn’t necessarily want him to win, knowing the opportunity to buy items under the threshold online for a bargain 10% less will likely disappear. But Chief Executive Ian Moir of Woolworths Holdings, the company that has bought out David Jones says Australia is looking at it all wrong if he thinks the tax will fix their problems and they should be focused on the customer instead.

“The introduction of any sales tax in any direction only has an impact in the short term and evens itself out over time,” Mr Moir said.

“The reality is it set businesses and retailers in Australia back because they spent more time arguing about that … than they did thinking ‘how can I get ahead of the curve, what do I need to do, how can I make sure I’m giving the customer what they’re looking for’?”

The issue of removing the $1000 threshold for online goods and services was canvassed initially back in November of 2014, and then again in the government’s whitepaper on tax reform in March. Harvey and other Australian retailers with large quantities of fixed assets (from which they control their businesses) complain that foreign retailers are enjoying an advantage with the existence of this tax loophole.

Mr Moir spoke at an Australia-Israel Chamber of Commerce event in Sydney, saying retailers have to change, not force the tax system to.

“There has to be a reason to go to that store: that it be entertaining, that it’s engaging as theatre, that you like spending your time there,” Mr Moir said on Wednesday.

“You will see stores of the future be much more interactive, much more engaging and you have to spend money on that.

“There will be fewer (stores) and there will be fewer retailers”.

This fight has been around for a while now, over 5 years in fact, as the internet has caused more and more pain to our retailers on the ground. A 2011 Productivity Commission inquiry [pdf] right back in 2011 recommended against lowering the threshold despite finding strong grounds for it to be reduced significantly, saying that lowering the threshold to $20 would cost more than $2 billion to businesses, consumers and government while only generating revenue of around $550 million annually. It recommended keeping the $1000 threshold as is until it was cost effective to lower it.

But the window of opportunity around the tax appears to be to slip it in alongside the changes they are making to put a stop to Netflix and other foreign operators selling goods and services from outside Australia or the “Netflix tax” which is expected to reap the government $350 million over four years. The changes from this tax are being widely discussed to include  music and movie downloads, software and some online education courses.

Fact is, until the changes are locked in, Australians are enjoying a small window of opportunity to access some smaller products at the prices the rest of the world are paying… and soon we wont be able to. Or at least that is how I look at it.

Are you pleased to see the governments united to close the hole the retailers have been begging them to, or are you disappointed you might not be able to hunt out 10% lower priced products in the future?

 

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