Saturday, November 28, 2009

Amazon and the GST



I've said it plenty of times before, and I'll say it again: calls by Australian publishers and booksellers for the government to force Amazon to charge GST to Australian customers are profoundly misplaced. As a government policy it would be just plain bad.

Here are the reasons:

1. It would dampen the pressure on publishers to keep their markups on imported titles reasonable and competitive. (And the government have relied on this pressure as a justification for not tampering with the parallel importation restrictions).

2. Booksellers should welcome this pressure, not lobby to weaken it. The most effective way for booksellers to compete with Amazon is through ramping up the pressure on publishers to be more competitive on pricing, delivery and trading terms, and certainly not by (once again!) supporting publishers in their efforts to be protected from it.

3. I'm not an accountant or tax expert, but I'm sure it's relevant that the GST is a value-added tax, not a consumption tax or sales tax. So businesses have to be in the Australian value chain to be able to deal with it administratively and financially. Businesses that charge the tax receive input tax credits for the GST charged all the way through their supply chain. Overseas businesses supplying direct to consumers are, by definition, not in the supply loop. Nor are they subject to Australian law. This is why calls to 'slap a GST on Amazon like US states that impose their sales taxes', are naive. It's apples and oranges. If ever Amazon sets up a distribution centre in Australia, that's when they'll be forced to charge GST.

4. The Rudd government has just decided that Amazon is the savior - a friend of booksellers, printers, authors, readers, because of the pressure it puts on publishers to ratchet up their performance. So does the industry really think the government will now agree to protect publishers from that competitive rod up their arse?

5. Booksellers have one huge advantage in competing against Amazon - they don't have to charge freight. If that sizable impost doesn't currently deter Australians from purchasing from Amazon, then an additional 10% GST won't make one skerrick of difference, and is frequently washed away by currently fluctuations anyway. Why do booksellers keep banging on about this? Go to the publishers instead and bang on about the need for better, more responsive terms. That would be entirely productive.

6. It's simply not a good look for the trade to be arguing that book buyers should be lumped with another tax. And it's not a good look to keep arguing in Canberra for additional protection. Talk of 'levelling the playing field' is a dead give-away. It's how rent-seekers frame it.

It really is time the book trade grew up, and began to focus on the real issues facing it. There is so much that could be done if all parties stopped being distracted and absorbed by ephemera.


5 comments:

Michael said...
This comment has been removed by the author.
Steve Jones said...

Thank god you have brought this up Peter. I have heard on the rumor mill that at least the ABA will be looking into ‘beefing up’ it their lobbying for the GST to be imposed on Amazon, or similar imports, in the new year. What a P.R. disaster for the industry!

Whether or not you believe the pricing rhetoric during the ‘Open Market’ debate it was reported, in some media outlets, that higher Australian book prices subsidized local Australian authors. Both the APA and ABA agreed to keeping a closed market and thus continue high prices – again I repeat whether you believe it or not this is what was reported. By lobbying for GST on imports it looks as though booksellers want consumers to pay even more. Can you image the headlines – Booksellers Lobby for Higher Prices. Consumers and the Government don’t care about a level playing field. Consumers want books at a price they feel is acceptable and will not like their decision making interfered with - in-fact they can get quite militant – and the Government wants votes. Do the maths!

On the ABA
The association has a voluntary eight-person Management Committee elected by the membership. Members of the committee have a ‘stewardship’ role towards the membership as a whole and are expected to apply their skills to this task. The Management Committee assists in improving the Association’s policy, activities and administration to help the Association achieve its objectives. The ABA has a permanent staff under the responsibility of the Chief Executive Officer.

From the ABA.org.au

I wonder whether the Management Committee has put a lot of thought into their focus on lobbying the Government on Amazon imports. Who is advising them? Are they listening to that advice? Have they asked the whole membership? Are they representing every bookstore in Australia – or just fulfilling their own agendas?

Several years ago I attended a national ABA meeting and heard advice given on the topic – ‘that it will be bad PR to push for a tax on imports’. While some of the Management Committee have since left many still remain who attended that meeting.

I for one have not been asked my, or Kinokuniya’s, opinion although I have now publicly announced it. Is the association representing the needs of Kinokuniya or bookselling in general, as per their mandate? As a company, Kinokuniya wants the Australian market to grow and thrive through ethical means. We want Australians to shop in every Australian bookstore because they enjoy it – not be forced into that situation.

Even if the lobbying works and Booksellers win the battle for a GST to be imposed on Amazon, and the like, the war will have been lost and the image of Booksellers irreversibly damaged.

Perhaps it would be better for both Associations to lobby for a removal of the GST on books thus creating a level playing field. They may not win the battle but they will certainly win the respect of consumers. And isn’t that a better outcome?

Peter Donoughue said...

Thanks Steve. I think you're probably unique in the bookselling industry! Everyone else seems to think it's motherhood and apple pie that Amazon should be forced to charge the GST.
I don't agree the industry should lobby for the total removal of the GST from books either. What's so special about books? It's one of those precious 'cultural' arguments we're so fond of - and hide behind. And the profit margins of multinational publishers will simply fatten as a result.
Nah - there's no substitute for open and vigorous competition. Let 'er rip!

Steve Jones said...

I was trying to be diplomatic. I don't care about the GST one way or another. Some Industry figures should be concentrating on Google and updating supply chains and marketing around books. Both of which are a little dated.

Dan Lyson said...

Thank you for a thoughtful post.

I always have a laugh when the annual letters to the editor appear from booksellers about this issue. Surely, they don't seriously think that it is the GST that makes the difference between shopping at Amazon (or others) and local bookshops.

Today a book was delivered to my door today from the UK (4 business days after ordering it). It cost me $31.32 in total (yes, including shipping) for a book that sells in Australia for $55. If the ABA have their little victory then I would have paid another $3.10 in GST, still leaving $20 in my pocket, a 40% saving on the local price.

So ABA, fight your little fight, cost me another $3 (and any possible goodwill towards your cause) but I'll still pocket the remaining $20 saving and encourage more to do so. Even when the dollar is less favourable it nearly always works out a good deal cheaper to buy online.

Typically I can buy hardback editions for less than local paperbacks.

I understand the cultural arguments, supporting local authors etc but large numbers of book buyers simply aren't affected by this and vested interests don't seem to understand this. I buy a lot of books but local works would make up less than 5% of my purchases, if that. Even if the local industry disappeared entirely then I'm sad to say it would not make any great difference to me. I don't mean that vindictively, just stating the facts from my position.

Now, I would prefer that local bookshops and publishing houses stay in business for employment reasons but not to the extent of paying almost double for my books.