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Internet a threat to local retailers

SFO_Online_Retail_1Australian retail revenue and jobs could be under serious threat due to the growth of online shopping from overseas retailers, fuelled by Australia’s lenient import tax regime.

Russell Zimmerman, executive director of the Australian Retailers Association (ARA) and owner of the Spark’s Shoes retail chain since 1980, confirmed the ARA’s attention had been drawn to the issue following press coverage, member enquiries and an open letter to retailers sent by David Mendels, managing director of wholesaler International Fashion Group.

Mendels’ letter confirmed that overseas online retail shops, particularly from the US, were a growing problem for Australia’s wholesale and retail markets due to an outdated taxation regime.

“The consumer in Australia is able to purchase up to A$1000 from overseas, duty and GST free, a saving of approximately 20 per cent, and benefit from not having to pay on shipment taxes from the country of purchase, which can add a further 10 per cent of savings,” Mendels stated.

Australia’s import tax loophole is understood to be a hangover from the years before the computerisation of the customs department, when a $1000 threshold was put in place on dutiable or taxable imports to speed up paperwork at the customs department.

“However it has now come to pass that the Australian consumer can now purchase goods from say the US and other countries at a distinct advantage,” Mendels said.

In Germany a flat 50 per cent tax on all online retail outside the EU has been introduced, while in the US 22 per cent duty on top of various state taxes applies and in the UK 12 per cent plus 20 per cent VAT applies.

“If all of these countries can protect their citizens’ businesses, why can’t ours?”

Meanwhile a spokesperson for Assistant Treasurer, Bill Shorten, said the Board of Taxation had found it was not “administratively feasible” to apply GST to goods worth less than $1,000 imported from overseas.

“However, the Gillard Labor Government understands the concerns of retailers and other stakeholders about this issue, particularly in light of the high Australian dollar. It deserves serious examination and, while the threshold is good for consumers, we need to balance that against the interests of retailers and the administrative burden on businesses.”

The ARA’s Russell Zimmerman said the organisation took the issue “very seriously” and planned to conduct member and consumer surveys before taking appropriate action.

“It’s clear that this is a problem that has really escalated in recent months, and the ramifications are huge.”

Zimmerman cited research from consultancy Frost & Sullivan predicting around $12 billion would have been spent by Australian consumers on online purchases during 2010, with around half of that from overseas based retailers.

“If we’re talking about around $6 billion, that means hundreds of thousands of jobs in the retail sector are being jeopardised.”

Consumers buying low cost footwear from overseas e-tailers also risked being saddled with faulty or substandard goods that were often difficult to return to international suppliers, he said.

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