From the 1st of July, courtesy of the Federal Government who has once again bowed to big busines, lobbyists and those who provide large donations (to both political parties) another tax will be forced upon us.
This new tax will apply to all online purchases under $1,000, where the items come from overseas.
This is the result of extensive lobbying from big business (Harvey Norman, Myer, David Jones et al) who claim their declining sales have been caused by these types of purchases.
Basically they are saying it is not fair for an overseas retail business to provide the same goods they sell but at a better price and with better service.
If you believe that, then you are a big business wearing blinkers to stop you from seeing reality. The reality is that in Australia we receive poor customer service and are ripped off by their suppliers pricing models.
Allow me to explain. But first a quote from an Australia Post study published in 2017*;
Online retailers are a blessing for many Australians – especially those living remotely, or in areas with limited access to conventional bricks-and-mortar stores. Increasingly, customers are heading online to find their everyday essentials at better prices, with buyers in remote
regional locations and tourist towns shopping online the most.“
So if shopping online to get the best deal is so important to us, why are they going to tax it?
The answer is in the question, as Governments are always looking to increase taxes. Or, in this case, impose a brand new one. It pays for their perks and helps to fill holes in their budget created by overspending on shiny new infrastructure in marginal electorates.
This new tax goes against the findings of the report quoted above and is weak, pathetic and completely unjustified. Do local businesses really believe that an increase of 10-15% on the price we pay for an item overseas is going to somehow force us to buy local instead? Maybe, if they offered free shipping instead of charging $10-25.
I can buy one book a day for a week (or a month!) from the UK and have free shipping on each one. I can also buy almost anything from China with free shipping. And yet Australia Post would charge me around $20 for me to send one book interstate (including packaging).
I would hate to get a quote from Australia Post as to what they would charge me to send just one book back to the UK!
Local businesses need to be better negotiators with Australia Post, or use someone else (Startrack).
And then there is the ‘Australia tax’.
The ‘Australia tax’ is another way of saying suppliers (Apple, Samsung, HP, Sony, LG and many, many more) rip us off because we are “just a small market” so their costs are higher. Since all their products come from the same factory I find this argument hard to swallow. Again, local businesses need to lessons on negotiation.
So overseas companies sell their products to Australian retailers at up to 30% more than their very same goods sell for overseas. Books, DVDs, medicines and computers to name but a few.
On a visit to the US in December of 2015 my family saw bottles of 500 ibuprofen tablets (yes, 500!), possibly the biggest selling painkiller in Australia, on sale for $10 each. Here $10 buys you about 48 tablets, or ten times the price of the same product you can buy in the US! The same whopping price differential can be found on many everyday medications and vitamins.
A pair of Rockport shoes is half the price if ordered from overseas compared to my local shoe store. The exact same product from the same supplier from the same factory.
I think you get the point.
In addition there are some products you cannot buy here at all, so you have to purchase them from overseas. This includes many excellent vitamin supplements and other health care items. Why should we be punished because we have to buy these from overseas?
There are many, many more examples, especially if you do a quick search for technology, clothing and health products. Many of these overseas sites have free shipping (as per the above examples) and arrive within days. This is mainly because they do not use Australian Post, who take longer to deliver everything and charge you three times the amount for the privelidge.
So because Australia Post cannot get its act together (except when paying their CEOs very large bonuses despite losing money, in which case they are extremely efficient) and large businesses cannot negotiate properly they blame overseas purchases for their declining sales.
Actually we buy online simply because we want the best price and the best service, and unfortunately businesses in Australia cannot compete in most cases.
So we will be paying the government a brand new tax of around 15% of the value of the items we now buy online.
Fifteen percent? Yes, because GST will not only apply to the price of the item you purchase online from overseas, but also on any overseas taxes (such as the VAT in the UK, their version of our GST) and shipping. So you will soon be paying up to 15% more for those items you buy online today from Amazon, Book Depository, iHerb, Alibaba and many, many more.
The same Australia Post report quoted above says most of our purchases online are with largely domestic businesses, not overseas ones;
“Despite international access, domestic purchases still make up the majority of online spending in Australia. At the end of 2016, domestic spend represented 79% of the online market, showing a growth rate of 11% compared to 7.3% for international spend.”
So why did businesses here complain so much about it being unfair? Because that is easier than competing or trying to negotiate better pricing from their overseas suppliers.
The report also states that overseas spending accounted for 21% of purchases. The vast majority, 79%, being purchases from Australian online sites, so they can get it right if they want to. The only unknown factor is how many of those overseas online purchases were under $1,000, the target of this new tax. My guess is around 70%, but we will use 50% to be conservative.
Given that Australian households in 2016 spent $21.65 billion (according to Australia Post whom I don not believe as I shall explain shortly) in online purchases, collectively we will be paying an additional $341 million in tax each year.
It gets worse if you believe Roy Morgan Research over Australia Post (I would) as their study states that we spent $37.8 billion online during the 2014-2015 financial year”**. If we use their figures, we will be paying a total of nearly $834 million a year (using the same numbers as above) on this new tax.
No wonder the Government chose to listen to big business over common sense. However doesn’t the Federal Government keep saying they should let market forces decide pricing because competition is a good thing? At least that is what they say about the electricity market.
So not only are we currently paying far more locally for many hundreds, maybe thousands of items because of the Australia tax, we will soon be paying 15% more for those same items.
My suggestion is that local businesses lift their game and then we would gladly buy from them, as many studies show we want to buy Australian. To do this they need to significantly improve their customer service, have far better web pages, make it easier for people to buy online (have you seen the David Jones and Myer websites? Complete rubbish) and improve their Google search score.
Much easier to blame someone else, and it’s free too.
However, within this rant of mine I do concede that some big businesses here are viewed as quite minor in sales by their global suppliers. Therefore they cannot negotiate lower pricing (Samsung, Sony, Apple to name a few). I suggest they make this fact publicly known so we can decide what to buy with all information on the table. A nationwide boycott of certain brands might even get them to lower their prices.
Oh, and also go to war with Australia Post over their rediculous delivery charges.
When an overseas online book retailer in the UK can send me a $12 book with NO delivery fee, and I can buy a product from China that is worth $5 and get it delivered FREE, we are being ripped off by local freight charges.
In summary GET RID OF THIS STUPID TAX! Businesses have to learn to be more competitive, improve their customer service, maximise profits, make sure they can be found by Google and have great websites that look good on a phone. Pull your socks up folks, do some targeted marketing and stop blaming everyone else.
The retail market has always been tough, so learn what works for your business, keep experimenting.
You must keep up with technology and react quickly by constantly making changes to your product or service.
Or we could all just pay hundreds of millions of dollars in a lovely new tax.
* Inside Australian online shopping, Australia Post and Startrack, 2017
** According to Wikipedia there were 9 million households in Australia in 2016
*** The state of Australia’s $37.8b online shopping landscape, Roy Morgan Research, 2nd December 2015