Friday, November 5, 2010

The GST and Online Retailers: the ABA's bad campaign

This appeared in the WBN yesterday:
GST-free online purchases a growing concern for booksellers:

Australian booksellers are among a growing number of Australian retailers who are calling on the federal government to reform the rules guiding the application of the GST to online purchases from international retailers.

Inside Retailing Online reported last month that the Australian Retailers Association (ARA) has been 'stirred into action' by a 'groundswell' of concern among its members about increasing numbers of Australian consumers purchasing cheaper goods online which do not collect GST.

Goods coming into Australia which are valued under $1000 are currently exempt from GST, and are therefore sold at cheaper prices to their Australian equivalents. The ARA estimates that the sale of these goods is costing the federal government approximately $600 million in lost revenue.

In recent weeks, Australian consumers have been given added incentive to purchase goods online with the strength of the Australian dollar against the US currency.

President of the Australian Booksellers Association Jon Page told the Weekly Book Newsletter that more consumers are choosing to shop online for books because of the strong Australian dollar, which is compounding the problems faced by the bookselling industry because many overseas books do not attract GST.

Page said that the application of the GST on books in Australia has had a significant impact on the industry, with book prices rising almost 33% since its introduction. Page said that booksellers 'are going to continue to be disadvantaged' as long as GST is not being collected on most overseas books purchased by Australian consumers.

'Most book orders consist of 2-5 books, which is well under the [$1000] threshold,' said Page. 'For there to be any impact on books being imported into the country, this threshold would need to be reduced significantly or the GST removed from books in Australia,' he said.

Similar sentiments were also expressed by ABA chief executive officer Joel Becker who told the Weekly Book Newsletter that the ABA expects the issue will be raised in many individual submissions, as well as their own, to the Book Industry Strategy Group.

Becker said that Australian booksellers are faced with 'an unfair impediment' when competing with overseas booksellers as they are effectively required to charge 10% more than international retailers before any other concerns are factored in.

Becker said that the issue is about more than just lost tax revenue for Australian governments, with significant flow-on effects on employment levels in the industry and in severe cases, the closure of businesses.

Becker told the Weekly Book Newsletter that the problem could be resolved in one of two ways.

The first option, said Becker, is to 'go back to what was supposed to happen before... the Australian Democrats went belly up to the Howard Government, and do not charge a GST on books'.

'Or if the government, in spite of having been opposed to a GST on books when in government and, later, in opposition, accepts that there should continue to be a GST on books, then introduce fairness into the process by charging GST on cross border purchases,' said Becker.

'All that we ask is that fairness and equity come into play,' he said.

This whole obsession with trying to get the GST applied to books imported online is pathetic on a number of counts.

Here are the facts:

1. The government reviewed the GST regulations governing imports as recently as February this year. The investigation by the Board of Taxation concluded that, if the current $1000 threshold were lowered to $250 as recommended by retail associations, 'there will be an increase in administrative costs of bringing more goods into the customs system in order to account for the GST which is likely to outweigh any benefit....[consumers would be] paying disproportionately high amounts of GST and administrative charges to have their goods released from Customs compared to the value of the goods' (p.46).

The Board concluded that, at the far lower threshold of $250 (no organisation was proposing it go any lower) the case had no merit. When you consider that most consumer book purchases from Amazon or The Book Depository would be well under that amount - 99% at least, I'd venture - then the case doesn't even get off the ground! 

The ABA, and booksellers generally, ought to appreciate the following:

1. There is no chance whatsoever of any government removing the GST on books. It's really silly to even contemplate that, and it looks silly and ignorant to publicly campaign for it.

2. There is no chance whatsoever of any government lowering the threshold to below $250. The outcry from consumers would be loud and long. The GST is a tax system, not a job creation or protection mechanism.

3. Even if by some remote chance the GST net was widened to capture these online purchases, then - and this is important - IT WOULD HAVE MINIMAL EFFECT ON BOOK IMPORTING BEHAVIOUR! Despite the humorous 33% claim of Jon Page above, the GST is still only 10%!

4. By far the most critical issue is the way consumers are forced offshore by the over-pricing of imported books in this country through publisher markups way out of line with foreign exchange realities. And now we're at parity, the situation is worse than ever. Having joined publishers to save them from having to face real competition through parallel imports last year, the ABA is reduced to this absurd focus on the GST because they've nowhere else to go.

5. The booksellers ought to take the fight to where it really belongs - up to the publishers and their outrageously outdated markup policies. The days of imported $32.95 TPB's and $40-50 HB's are well and truly over. It's way past time the pricing nexus between local titles and imports was broken.

Step up Jon and step up Joel. You know what you have to do. Stop being nice.

1 comment:

Blue Tyson said...

Also, if you put GST on books from the Book Depository

then the 7.34 paperback I ordered becomes 8.07

and the version here is still 22.99

Hardly going to change anyone's behaviour.