Offshore tax avoidence, or GST for online shopping

http://www.flickr.com/photos/gandhiji40/416198118/It’s been a bit frustrating watching the debate about Australian retailers’ campaign for GST to be levied on online shopping under the current $1000 limit. Whilst I’m no fan of our big retailers, I also dislike the spreading of misinformation and false arguments.The Productivity Commission is undergoing an inquiry into the future of retailing. Most likely this is the target of the retailers’ advocacy.

SMH quote Christopher Zinn of CHOICE responding to the retailers’ campaign saying that:

“The big chains should recognise that it’s their high prices, limited range and poor customer service that increasingly encourage people to use the internet,” Mr Zinn said.

”Consumers are simply chasing the best deal and the best service and often these days that is found online.”

Well, if it is poor customer service that send customers online, I fail to see why this justifies a ten percent government subsidy to shoppers who go online. Surely if service is so bad, customers will shop online regardless?

And if shoppers are going online due to high Australian prices, surely this supports the Aussie retailers argument that overseas retailers are gaining an unfair advantage by avoiding Australian taxes for products transacted and received in Australia?

I’ve been concerned by a few lines run by CHOICE of late, not least comments indicating a desire for the removal of price regulation in energy retail markets. To me they appear to have failed to identify the core issues again.

ABC online quote Ruslan Kogan, an online retailer, saying:

“… the retailers in the US have negotiated much better prices from the distributors than the big retailers in Australia have.

“So a businessman looks at the commercial environment in the marketplace and tries to find ways to innovate for their customers in order to give them a better deal.

“They don’t try and lobby the Government in order to get tax increases.”

Ruslan seems a bit confused. Australian shoppers can currently avoid GST by sitting in their lounge rooms and purchasing online. This is a tax loop hole that is leading to tax avoidance. As online shopping grows, it is distorting the market against domestic retailers, and it is reducing the Government tax collection. This might be OK if there were social benefits from the policy, but I’m failing to see any.

Who benefits from the current tax break? Overseas retailers. Online shoppers, who I suspect are less likely to be low-income and living in disadvantage as they are middle-income consumer class.

Essentially, the Australian retailers are lobbying for the closure of a tax loophole. Yes, they would benefit from the change. That’s why they are running the campaign. But just because we dislike the messenger doesn’t mean that the idea should be instantly discredited. There are problems with retailing in Australia, but they are not solved through tax subsidies to overseas competitors.

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