The campaign by major retailers calling for the GST to be applied to items bought overseas for less than $1000, is evidence that the long promised “online shopping revolution” has arrived.
Or is it?
Presently the GST is applied to (almost, thanks Meg Lees) all domestically bought goods and services but is only applied to online purchases of more than $1000.
This has prompted a coalition of large retailers, including Myer, Harvey Norman and David Jones to take out newspaper adverts claiming the situation is unfair and threatening their profitability and Australian jobs.
On the face of it, the present situation does appear to be unfair.
Australian retailers have to pay GST on goods worth less than $1000, their overseas online competitors do not.
Different rules for different retailers based solely on the country in which they operate.
It is important, however, to ask why this is the case.
Simply put, the cost of collecting, administering and enforcing a lower threshold for GST on overseas purchases would likely cost more than the revenue collected.
If it ends up costing the Federal Government money to protect local retailers, the proposition starts to look less attractive.
The idea that applying the GST to online purchases would change consumer behaviour and bring them back to brick and mortar stores is also questionable.
Many items are up to 50 per cent cheaper when bought overseas compared Australian retailers and the application of the GST would still leave them significantly cheaper than in Australian stores.
For example, a Nikon d5000 camera with twin lenses costs $1499 from Harvey Norman, compared to $900 (with free shipping) from King Trade Cameras in Hong Kong through eBay.
Even after applying the GST, this still leads to a saving of over $500, or 30 per cent.
Secondly, it is worth considering that only about three per cent of retail sales were made online last year and of that, at least half went through Australian websites, which pay the GST.
Australian retailer’s portion of online sales could be increased if they were more proactive about selling online.
Harvey Norman doesn’t sell anything on its website and David Jones only started offering online sales in November.
My suspicion is that if Australian retailers started seeing the internet as an opportunity rather than a threat, they might have more success.
Another interesting example of price differentiation between Australia and the rest of the world is the pricing of the recently released Beatles catalogue on iTunes.
iTunes Australia sells each song at $AU2.19, including GST, compared with $US1.29 in America, despite the Australian Dollar trading at parity with its US counterpart.
So even when GST is applied to goods bought online, and there is zero distribution costs, it seems Australian consumers still have to pay more.
It appears that the old adage, that something is only worth what someone is willing to pay for it, rings especially true for Australian consumers.
What do you think, should the GST be applied to goods bought overseas?