Buy GST Products Overseas and a Get 10% Discount

You may be well aware that there has been a lot of talk recently about shopping online and buying GST free items from overseas retailers. While the debate may be slowing down, the problem is far from being resolved.

It all started when a lobby group led by Myer and other signatories including technology giant Harvey Norman sent an open letter to the Government [PDF file link] complaining that foreign etailers enjoyed GST-free sales on goods and services sold for less than $1000. It was relatively quite in the media until Gerry Harvey (executive chairman of the Harvey Norman retail store chain) indirectly lashed out at Australian shoppers for buying goods overseas.

He was talking about how hard (rather impossible) it is for Australian businesses to compete with GST free stores located on the Internet overseas. I’ll agree with Gerry about the maths of making a profit, because matching an overseas product price with the burden of 10% GST applied to a product in Australia is impossible to profit from at cost price. However, you cant stop the race because you’re not winning!

Why has this debate starting now? The only reason I can see why the big brand retailers are complaining about it and making news now, is that over the last year the Australian dollar has closely matched that of the US dollar. This resulted in more Australian online shoppers going overseas for some quick bargains. Products once never considered to be worth buying from overseas countries because of dollar exchange rates and shipping costs, are now competitive for us online shoppers; and of course this is why I think it’s starting to make the big retailers of Australia complain about it now, rather than a few years ago.

Gerry Harvey’s argument got ugly when he suggested the way forward is to buy products in Australia at all cost, including GST. We can all agree it’s good to buy in Australia, but not so much “at all cost”. In times of hardship like the recent global financial crisis, we all look for a discount. The sad part for Australian businesses is that right now some of these competitive bargains happen to be the same prices as overseas stores, except for that GST free, 10% discount on items less that $1000 the overseas stores have.

The debate continued and ended up seeing a huge backlash from the public. If it’s one thing you can’t do in Australia, it’s to blame your customers for trying to save money and feed the family. Being financially better off than most of us, Gerry and his big brand retailer alliance were hit with the back hand of the more financially frugal consumer via blog sites, facebook, twitter and the media.

There is no benefit to the consumers for retail associations to complain about Australians shopping online. 20 years into my own experience of “Inter-netting” and to me, hearing big retailers complain about online shopping really is like a baby crying over a busted ice cream. Sorry, but I really feel a baby with a busted ice cream is a good analogy of how I feel about it.

Retailers need to accept that the Internet is here to stay, and there’s simply no “buts” about it.

Calling for the government to intervene and reduce the GST threshold so the retailers can compete is not a good enough reason for the Australian government to change the tax laws (I hope). If retailers are not keeping up with consumer trends in the sub $1000 market, then it’s their own problem with getting cheaper supplies in the first place.

Where is this recent online shopping / GST review news at Today? It’s basically still an argument with many pros and cons. The Australian government has been said to been looking into the issue, which will probably take years to report on, and even more years to implement into a new tax. I think, in a few years we’ll have another tax or at least we will see a lowering of the GST tax threshold in the short term. If Australia does lower the GST tax threshold, we will see the changes in the tax return, asking you to claim what products you purchased overseas when the value is over the new threshold amount.

Will these potential GST changes affect the way you shop online in the near future? I don’t think so, simply because we will still go and search for the best price online. If it’s not GST this time, it’ll be some import tax retailers find to complain about next. For a bit of fun try this out: Go add 10% on a few overseas products and compare them to a complaining retailers’ web site or store.

At the end of the day, $10 still costs $10 no matter how you look at it. Price is the real issue complaining retailers need to address.