Thursday, December 11, 2008

GST on imports: yet another bad move by the industry

While we're on the subject of protectionism, the renewed calls by booksellers for the GST to be applied to imports, particularly from Amazon, are misplaced.

I wrote a letter to the editor of the Australian Bookseller and Publisher a few years ago pleading for the trade to not pursue this as a campaign, but to no avail. The CEO of the ABA at the time, Barbara Cullen, replied with heaps of facts and figures and a re-statement of the official ABA position that it would be relatively easy for the government to do this and it's manifestly unfair, etc, etc. However it essentially missed the point. The point being that a 10% GST imposition is a drop in the bucket and would have absolutely minimal effect on the volume of imports.

Firstly, the dollar has plummeted 30% since mid-year, thus making imports a hell of a lot more expensive than a 10% GST imposition could possibly do. This volatility is a built-in disincentive but it doesn't seem to be having all that much effect on book buyers.

Secondly, Amazon buyers have to pay the freight, and this is very often more expensive than the book itself. But again, this doesn't deter the many buyers.

Thirdly, it's hardly a good look for Australian booksellers to be campaigning for the government to clobber book buyers - their customers - with yet another tax.

Calls for 'a level playing field' in import/export matters are always calls for protection. Australian booksellers have decided advantages compared to Amazon, so they should recognise that and start to more aggressively capitalise on it.

Unfortunately that takes industry collaboration, systems development and significant financial investment. The hard stuff.

Calls to slap a tax on imports is easy.

1 comment:

Malcolm Neil said...

Hi Peter

The issue of consumption tax, retail and cross border trade is a problem for many industries not just books. The motivations of those who call for an application of GST on online sales and whether they are missing the point is immaterial, the real argument is about how governments respond to shifts in consumer purchasing, particularly when many of the services that governments supply are provided for out of consumption tax revenue. The call from booksellers matches the call from sporting good retailers; photographic equipment retailers; fishing equipment retailers; toy retailers; hobby and fashion retailers.

This isn’t a case of calling for a tax on imports, as the absence of borders on the Internet make the term meaningless. It is about the fundamental right of governments to collect tax based on their geographic borders. On current patterns we could see around $100m in GST revenue leave our shores by the end of the decade. Similarly overseas governments are looking at how they ‘protect’ their taxation systems. Around 17 states in America investigating ways to ensure online inter-state retail does not avoid their consumption taxes; The EU already provided a model for the collection of tax at the point of consumption by its rules on vendor registration for payment of tax at the point of consumption for digital trade.

Yes there is a significant self-interested component of our argument about a level playing field. In particular many of our members are involved in developing the online market themselves and their advantages are decidedly reduced by the requirement to charge a GST. And yes dollar fluctuations impact on the level of concern felt by some in the industry but using your own example a 40% differentiation on prices since mid-year (including a GST charge) is still significant compared to a 30% differentiation (excluding the GST)

As for clobbering our customers with a tax…. OUR customers already get clobbered with the tax

I wholeheartedly agree that our industry needs to work collaboratively to fully develop our local advantages, we diverge on the issue of the cost of providing free-kicks to overseas competitors.