GST Coalition

So unless you live under a rock, don’t watch or read the news, don’t use the Internet or  have no contact with another human being… or aren’t from Australia you will most likely be unaware of a certain Coalition of Big Businesses (Myer, David Jones, Borders and Harvey Norman1) pushing for the expansion of the GST (that’s’ the Goods and Services Tax for the people playing at home) to include all imported purchases made online. Sounds a bit odd really, generally businesses want less not more tax.

Although maybe that all changes when smart businessmen realise that like the Music, Film and Media Industries before them the Internet is beginning to threaten  – perhaps ‘is going to threaten’ is more apt – their business models, and therefore their market hegemony. Best to try to nip it in the bud while the online industry is still relatively small (Online purchases account for about 3-5% of the market – depending on who you listen to).

Only a little while ago the Coalition ran a whole bunch of newspaper ads which, (among other things) threatens that unless the Government acts quickly Australia “...will see a reduction in hours and shifts for casual and part-time workers” presumably this is all due to the lack of a GST on purchases made online. Now maybe I’m the odd one out here but that sounds and smells suspiciously like bullshit. Is the lack of a ten-percent tax really going to make people lose their jobs? Is broadening the ten-percent tax going to stop workers losing hours and shifts? I don’t think so. But let’s be fair here and examine the evidence put forward by this Big Business Coalition to prove their claim… Strangely I can’t seem to find any. Weird.

It’s a bit rich for Gerry Harvey to be claiming to want to stop this apocalyptic loss of hours and shifts when he wants to make our wages system two tier, so he can import temporary foreign labour and pay them less than locals. Such a system would be bad for all workers, foreign and local and would in my unprofessional opinion lead to “a reduction in hours and shifts for casual and part-time workers“. But hey he has horse studs and it’s “difficult to get staff“. Those crazy billionaires right?

This has – unremarkably in my opinion – led to a general backlash against the Coalition and (I feel a little unfairly) Harvey Norman in particular (probably because Gerry is the loudest of the lot) spawning a couple Twitter revolts (#boycottharveynorman for example). Though it isn’t just the twitter/blog-verse/osphere that are up in arms, people from all over the shop aren’t really sold on the idea either.

I think Online Retailers should be rubbing their collective hands together over this little skirmish, not only has the Big Business Coalition managed to provide the industry with tonnes of publicity – potentially exposing them to new customers – the backlash has revealed that people value them more than their offline cousins, it’s probably made people more endeared to the online industry as a result.

Both the Government and the Opposition have come out and basically told the Big Business Coalition to shove it, and the ATO has said previously that it would cost more to collect than what they raise from it. Only the Greens have come out and said it’s a good idea, which isn’t surprising really, and the Independent Nick Xenophon has come out and said something completely different from everyone else. So there’s a nice variety of opinions from everybody involved.

Presumably they believe the GST will level the playing field, between themselves and the myriad of Online Retailers which are generally offering better deals for products, and of course when customers are able to get the best possible deal they will. So let’s do a comparison between a couple TVs from DealsDirect and Harvey Norman. I’m choosing TVs because they’re electrical goods which is what I think most people are buying the online, and because that’s what I am most interested in.

Round One: DealsDirect vs Harvey Norman
In… Battle of the Televisions

(Unfortunately it seems that Harvey Norman and Deals Direct don’t stock the same brands of Television so the comparison is going to be a little skewed due to ‘brand’.)

First up lets look at their respective online catalogues with the Televisions sorted from cheapest to dearest. DealsDirect | Harvey Norman

The first two Televisions that come up on the list that are comparable are the CONIA 22″ HD LED from DealsDirect and the Toshiba 22″ HD LED from Harvey Norman. The CONIA TV comes in (as of writing) at $329.00 and the Toshiba comes in at… $399. That’s a difference of $70. So what happens when we apply the GST to the CONIA? Well assuming I am correct here (and I am frequently not correct) adding an extra 10% onto the cost of the CONIA only increases the price by around $40. So there is still a good thirty dollar difference in price. Thirty dollars can be quite a lot of money.

Alright, that is one example and I’m sure you can do your own price comparisons (I mean I did give you links) but what are the most expensive Televisions the two are offering?

Round Two: DealsDirect v Harvey Norman
In… What is the most expensive TV they offer?

DealsDirect is offering the Samsung Series 7 40″ 3D LED TV with a bonus 3D bluray player, that comes in at $2095 and Harvey Norman is offering the Samsung 55” (138cm) Full High Definition LED LCD 3D TV at $9999 (difference of $7904). Now I’m not going to lie, the Harvey Norman TV is the bigger, better TV of the two. But a non-technophile shopping around isn’t going to choose something that’s gonna cost them $9999, especially when they can get something for $2095 which includes a Blu-Ray player.
Now admittedly this is really an unfair comparison, but it does highlight the huge price difference between the two retailers. It should be pointed out that Harvey Norman has a wider variety of TV available.

(Some of the brighter stars may have realised that DealsDirect is an Australian Online Retailer which is already hit with the GST. I’ve used it to illustrate that adding the GST onto overseas purchases isn’t going to level the playing field at all, given that Online is still cheaper with it.)

I do think this completely unscientific comparison has shown the price large price difference between the Online and the Offline retailers. It’s said that whenever something goes digital the value of that thing drops, and it’s true. People are unwilling to pay $25 for an album, iTunes sells the songs you want for far less, same for movies and the Media is facing a huge crisis in funding, and it’s unlikely that people who’ve grown up with free news are going to pay for it. But maybe it’s not just going Digital that causes this drop in value, maybe it’s simply being accessible to everyone that causes it; and what makes stuff more accessible than the Internet? This is something that offline industries which can be transferred online are going to have to grapple with.

1The Age – Retailers’ GST call backlash

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One Response to GST Coalition

  1. Hi Chase,
    Great article. I recently wrote a similar post http://incript.us/giKDgt about online shopping and some of the issue I’ve had with it since I came home from The States and I agree that online shopping will be making a big impact in the near future.

    While living in Chicago I bought many, many items online and there the taxation issue is even more complicated because sales tax there varies by state and county (council) and you have to pay sales tax on items if the online retailer has a retail outlet in that state. So… really complicated right?
    Well no. Again it comes down to price and who is willing to offer the best price for an item. So even though you may have to pay sales tax for an item, often it’s proximity means that delivery costs will be much cheaper and the fact that there is a retail store where you can pick up you item that day (instant gratification still rules!) means that you can still save money even while paying more tax. Alternatively, you can trade higher prices for immediate possession of your heart’s desire.

    The US is far more accepting of online shopping with retailing online accounting for almost more than 40% of Christmas gift expenditures. And I believe that we are eventually headed in the same direction. Perhaps, the crying and whinging from major retailers is a stalling tactic while they get their online acts together. One can only hope.

    -Christopher @ Memory Box Backup

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