Adding GST to online purchases won’t discourage Australians from shopping online: Choice

Consumer advocacy group Choice has slammed recent statements by business leaders about the necessity of lowering the GST low-value import threshold to below its current level of $1000, saying the tax does not factor into the decisions of Australians about whether to shop online.

Given the level of savings available, Choice chief executive Alan Kirkland said it is “comical” to suggest adding 10% GST to imported online purchases would lead customers to buy more from Australian retailers.

The comments come as Choice reveals the results of a survey it conducted with 1000 Australian consumers in July.

That survey found 68% of consumers who buy from overseas websites say they save more than 15% in doing so, while 43% say they save over 25%.

“The size of these price differences is not surprising considering our research for the IT Pricing Inquiry last year found that Australians are paying around 50% more than US consumers for computer hardware, software, games and digital music,” Kirkland added.

Earlier this month, Just Group chief executive Mark McInnes said the low-value threshold for GST on overseas online purchases was the “largest component” behind the retail job losses.

“We are the only Western country in the world that allows that and it has cost thousands of Australians their jobs and we would urge the government to look at that in quick haste,” he said at the retailer’s most recent results briefing.

But Kirkland disputes this, saying that 73% of online sales in Australia are made with Australian retailers, and that the Choice research shows avoiding tax is not a key reason why people shop online.

“The top reason Australians shop online is so they can shop at the hours that suit them, followed closely by the convenience of getting products delivered to their door,” he said.

However, 12% of those surveyed by Choice did nominate saving on “paying duties and taxes by purchasing on overseas websites” as a reason why they shopped online.

In 2011, a report by the Productivity Commission found the cost of collecting GST on imports under $1000 would far outweigh the revenue generated.

Choice’s survey echoes a recent Mastercard one that also found lowering the threshold would not affect shopping habits.

Businesses continue to lobby for the threshold to be lowered, with Australian Retail Association executive director Russell Zimmerman recently telling SmartCompany he believes the new federal government has “a sympathetic ear” to Australian retailers on the issue.

The state governments of Western Australia, New South Wales and Victoria have publicly supported lowering the threshold. New South Wales Treasurer Mike Baird recently said he believed the threshold should move from its current level of $1000 to somewhere between $100 and $200.

Choice supports a “level playing field” for Australian retailers, but believes the threshold should only be lowered if it can be done cost-effectively, “without burdening consumers with massive fees, delays and red tape”.

In 2011, a report by the Productivity Commission found the cost of collecting GST on imports under $1000 would far outweigh the revenue generated.

“Otherwise, it’s just a deadweight loss on the economy, with the inefficient costs of collection – whether paid by governments or directly by consumers – outweighing any benefits, and placing even more cost-of-living-pressure on households,” Kirkland said.

“The retail sector is facing some real and significant challenges, but the low-value threshold is simply not one of them.”