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102 responses to “Gerry Harvey’s rent seeking and Australian politics”

  1. OMG Squirrels

    I think this is a relevant link for this topic:

    James Thomson at smartcompany.com on “5 reasons the big retailers are wrong”

  2. Paul Norton

    I was bemused to see Borders’ logo on the campaign ad in today’s paper complaining about “unfair competition” from online vendors. All the items I have purchased online have been CDs which Borders, and every other CD shop in Brisbane, didn’t have in stock and haven’t had in stock whenever I’ve looked.

    It is, of course, retailers’ prerogative to decide which product lines they have in stock and which ones they don’t, but it is risible to then cry foul when consumers go elsewhere to buy stuff the retailers choose not to sell.

  3. Fine

    I think (a) is very true, Kim. The average punter isn’t the slightest bit interested in supporting this ridiculous campaign. Even the major retailing organisation won’t support it. Maybe this will put a bit more guts into the Gillard government.

  4. Lucas James

    More on why the retailers (including MPAA/RIAA/ACL) are wrong, see Geordie Guys piece.

  5. H&R

    GST is a red herring issue. The fact is, you could reduce the threshold to $200 and consumers would still be saving a motzah, because Australian traditional retail just isn’t remotely competitive with the best of the online world.

    Big Retail in Australia has had ten-plus years to sort out its online strategies.

  6. SimonC

    As a blowhard, middle-class, internet libertarian, I am completely happy with the situation as it stands.

    What confuses me is the response of various lefties on the issue. This is a pretty clear win for the free market, and globalisation. Australian companies that pay award wages, have OH&S and other worker protections (as well as paying/collecting taxes such as the GST which goes towards such things as the shiny new parental leave scheme) are losing out to overseas companies that, presumably, do not provide the same protections for their workers.

    Instead of the GST, consider the response if consumers used a similar loophole to bypass any particular carbon taxes that might be raised in the near future…

  7. weaver

    I was bemused to see Borders’ logo on the campaign ad in today’s paper complaining about “unfair competition” from online vendors.

    The Australian Borders is just Angus & Robertson anyway. Who can’t even be bothered having stores let alone stock.

    Oh, and SimonC? There is not now, nor has there ever been, nor will there ever be, any such thing as a free market.

  8. moz

    SimonC: it’s being presented as a problem for the major retailers who most lefties (me, for instance) dislike, so it doesn’t come across as a bad thing. The residue of smaller retails who have not been wiped out by the likes of Gerry Harvey are not affected by online sales much either. So where’s the harm? We lose a few more casual minimum wage jobs to China, so what. There are much bigger issues to worry about.
    I expect the same loophole will apply to any kind of carbon tax, although the combined gst+ct may be enough to make it worth dropping the threashold to $500 or so. That’s not something I’m personally much worried by, purely on efficiency grounds. Same reason I don’t support making cyclists pay rego or the subsidies for private health or education.

  9. James Wakefield

    I actually kind of agree with the retailers here, because GST is meant to be on everything you buy and this seems like a strange loophole. Currently there is a incentive for an Australian company to set up their on line store overseas to sell to people here. I also don’t think that you should be able to get discount electrical goods and cheap bottles of booze when you have just come back from holidays. Maybe the way to fix this without putting tariffs on goods is to ensure that standard GST is charged on our exports and get rid of our duty free stores and encourage other countries to do the same. I know it is yet another prisoners dilemma type of problem.

  10. Labor Outsider

    SimonC

    I’ve been a bit puzzled by this as well. It is certainly true that the retailers are massively overestimating the impact of online retailing on their revenue and domestic retail employment.

    But the principle of equality of taxation for equivalent activities is rather important. Let’s say online retailing through foreign companies represented 15% of domestic retail sales. Would people be equally happy with the tax leakage? Usually those on the left hate the idea of tax competition across jurisdictions. So, what exactly is the public policy argument for excluding foreign online sales below $1000? The only one I can come up with is that the administrative costs for levying the tax on such sales are outweigh the benefits from higher revenue. But I find it hard to believe that $1000 would be the appropriate threshold even if that was the case.

    Perhaps the issue is that some progressives have never supported the principle of consumption taxes? Or because progressives like buying books from foreign online suppliers and like the tax benefits? Or is it that people find the tone of the retailers’ campaign distasteful and misleading?

  11. zoot

    Ummm, SimonC, I think you’ll find that one of the main arguments against Gerry and his friends is that they are not “losing out to overseas companies”.

  12. Labor Outsider

    Also, I’d object to the term rent seeking in this circumstance. In principle, all the retailers are wanting is equality under taxation (unless I am missing something). It isn’t as though they are lobbying for tax advantages. They are lobbying for tax disadvantages to be removed. I agree that they have gone about this in the wrong way, but that doesn’t mean their entire argument is wrong.

  13. PinkyOz

    Hmm, there is a point there, just because we don’t like Gerry Hearvy and Solomon Lew, doesn’t mean we should weight things agains them … but then again, they have been playing the retail game for unbelievable benifit for years at the cost of loyal and choiceless consumers, so maybe they have it coming.

    I would probably say there isn’t really going to be a consistent line to take through this. There might be however an argument for having a good look at trade practices in retail more generally. The taxes and tarrifs, and even shipping costs do not really account for large disparities between trade weighted prices of goods in Australia and other industralised countries, it certainly feels like we are the cash cow consumers for someone, it might be nice to know exactly who.

  14. Andrew Reynolds

    LO,
    To me, the point here is that the retailers know that as this be difficult to implement it is bound to make it a lot slower, and much more expensive, to import the goods.
    If you think about it, the GST will have to be collected somewhere. If it is to be collected at source, then the overseas retailers will need to be registered for GST purposes. This is, except for perhaps the very largest, not going to happen. It will then need to be collected from the importer – you. The only way I can see that is that any goods you buy will need to be held at the post office (or courier) until you pay GST. At best this means that you will get a note in your letter box to go up to the post office (during office hours, of course) to pay the GST.
    You will then need to make time to go there, have the postie look at the parcel and put you through the whole invoicing process.
    The potential for a false declared value will have to be dealt with (most online stores in my experience routinely do this) so you will probably need to open the parcel and somehow justify the price and then pay the agreed GST. If you do not agree then there will have to be an appeal process.
    After all that then Gerry Harvey is probably hoping you will say “Stuff this for a joke – I am off to Harvey Norman’s next time”.

  15. patrickg

    LO for a dude that’s worked for govt that seems a very naive take.

    Harvey et al are pushing for a gst on <1000 because they know the cost to govt of implementing a tax on the huge flow of mail coming from overseas retailers (often labelled as "gifts" I might add) would be astronomical, if at all plausible. Banning would be far more practical. Bring on the GST if they want it and it can be done, I don't give a shit, I'm saving a lot more than 10%.

  16. patrickg

    Andrew beats me to it.

  17. Robert Merkel

    The other reason why this campaign is going down like a lead balloon is that a lot of people shop online and know that many things are a *lot* cheaper – way more than 10%.

    You don’t need to be an economist to know Gerry Harvey is talking out his arse.

    To be fair, where there is a big margin, a lot of it seems to be being taken by importers rather than the retailers.

    What I think the retailers should be pushing for, long term, is an international treaty on value-added taxes to make paying them dead easy as part of the transaction.

  18. Alister

    I’m opposed to it (among other reasons explained at more length), because levying the GST would cost more money than it would raise. The issue is a red herring, with imports accounting for some 0.6-1.5% of retail sales.

  19. Russell

    “…but that doesn’t mean their entire argument is wrong”.

    What’s wrong is their assertion that it’s the 10% that drives people to online. It isn’t, it’s the range and service, plus, savings of a lot more than 10%. What’s happening to them is the consequence of gouging as much as you can from your customers and giving as little as you can. They’ve gone a bit too far.

  20. Labor Outsider

    I acknowledged that administrative costs probably explain the current regime, but it isn’t clear to me where the $1000 threshold comes from and I would be very interested to see what proportion of foreign online sales comes from quite large retailers. I’m prepared to speculate that a large proportion of foreign online sales is from vendors with total annual sales into Australia in the millions of dollars, but I stand to be corrected if anyone has the data at their disposal. Vendors with large Australian sales would be very unlikely to stop selling into Australia if they had to register for the GST. I agree that a regime that collected the GST from the importer would be impractically costly.

    More broadly though the current regime does create an incentive for local sales to be displaced over time by foreign online sales. Right now it doesn’t matter much, but if retail sales continue to grow rapidly over time, the competitive imbalance will get larger.

  21. Labor Outsider

    Look, it is pretty clear that there are a lot of inaccuracies in the retailers’ argument because there are a lot of factors besides the different tax treatment that encourage some people to shop through foreign online retailers. But again, that doesn’t change the fact that at the margin the different tax treatment changes relative prices, which in turn affects relative demand.

  22. PSC

    LO -

    As a practical issue, shipping small goods and insurance on small packages is expensive, and comes close to a 5-10% markup.

    Customers are happy to pay an extra 10% for quality local service.

    The problem is a 50%+ disparity between local and overseas pricing.

    Or is it that people find the tone of the retailers’ campaign distasteful and misleading?

    Or maybe progressives can see self-serving bulldust for what it is.

  23. Andrew Reynolds

    PSC,
    To me, the problem is that self-styled progressives only see the self-serving bulldust when it comes from some people and not others.

  24. Russell

    “that doesn’t change the fact that at the margin the different tax treatment changes relative prices, which in turn affects relative demand”

    Does it? We hear people say that it isn’t 10% that’s affecting their decision, but other factors, so ‘relative demand’ is probably not affected much at all. The GST factor is insignificant.

  25. Hal9000

    An example might be helpful. I recently bought an exhaust gas temperature gauge from the US for $90, plus $15 shipping. The cheapest I could get a less feature-packed device for in Australia – only a warning light/buzzer, no digital readout – (also internet ordering) was $360. The shipping cost (US Postal Service) was more than 10% GST and 5% import duty would have been. Australian retailers were happy to charge a 300% plus margin, and I was happy to avoid paying it.

  26. Labor Outsider

    PSC

    The shipping and insurance costs on small goods are a simple cost of doing that type of business. It isn’t the role of government to offset that higher cost by exempting such goods from taxation unless the administrative costs are too high. All I’m saying is that I’d like to see more evidence about the actual administrative costs, especially for larger foreign online retailers.

    And perhaps I’d take the progressive line more seriously if such people were also calling Australia’s auto manufacturers on their self-serving bulldust when it comes to tariffs and other subsidies.

    I find the disconnect astounding.

  27. Robert Merkel

    Andrew, I don’t think blind spots are the preserve of any one particular political ideology. But there is another isssue here – the person making the self-serving argument is a billionaire franchise operator. I think it’s entirely reasonable to give his self interest particularly short shrift.

  28. Labor Outsider

    Russel, yes it does. As long as the price elasticity of demand for such goods is not zero (which it isn’t), a change in taxation policy with an incidence that fell partly on the consumers of those goods must affect the demand for such goods.

  29. Labor Outsider

    Robert, why doesn’t that logic apply to auto manufacturers then?

  30. Francis Xavier Holden

    Yes Harvey is talking out of his arse – but thats nothing new.

    I notice none of our reporters bothers asking him
    1)How much of his products are made in Australia and support Australians in jobs
    2)Hows his expansion in Ireland going?
    3)In his stores in Ireland does he support Irish jobs, Australians jobs or what?
    4) How come he doesn’t have any online purchasing?

    HN is selling MS Office 2010 for $379 but I have to drive to one of his stores to buy it. City Software online Oz will deliver it tomorrow and sells it for $284 – Amazon US $211.

    This campaign is partly about retaliation back at consumers who shop around. Competition and level playing round are the McGuffin. Its also partly about the fact that Harvey, at least, doesn’t have a clue about online retailing.

    We have reached a stage with air cargo and postal serices and couriers and the net it is cheaper to send a bottle of perfume direct to a consumer in Brunswick from HK via online ordering than it is to ship it here, store it in a warehouse, stock it on a retail shelf in Doncaster, pay a Sales assistant to hype it and sell it over the counter. Its also cheaper, and this is the big point, than shipping the bottle to an oz warehouse then selling it online and shipping it to a home in Brunswick.

    I am sure the real reason for this campaign is to soften up the tax office etc for when Myers and DJs etc go online from China or HK. They want to be able to defend their move and be clear that the $1,000 threshold will stay – otherwise their move offshore will be a bit more difficult.

    This is what they are softening up the government and the Productivity Commission for. Gerry is the (unwitting I think) bunny being used by others.

    The imposition of a lower GST threshold won’t happen. Its too costly ti implement and collect. But if it did happen all it would do is impose very big costs on the consumer. Cost way beyond the GST 10%. We know this because we can look at Canada.

    Canada has a $20 threshold for GST cross border.

    I can, and do, order a pair of shoes from UK that cost aud$200 landed on my door.. (here in Henry Bucks or DJs the exact same brand if available and usually it isn’t cost $450-$500+)..They take 3 or 4 days to arrive from UK. That’s right 3 working days. Order Friday night late and they arrive Tuesday.

    In Canada the same order can take 3 weeks or more.
    Why? Because the GST has to be paid before customs can release the package and customs has to check a lot of the packages AND judge/assign value.

    Usually the GST payment can only be done by a third party such a as the courier who charge something like $50 upwards on top of the GST for the service. This cost is relatively fixed and independent of the value of the item so a small value online item say a perfume for $50 end up costing, in Canada, twice as much due to customs/tax processing costs.

    So – the lowering of the threshold for GST exemption for cross border transactions imposes an absurd amount of costs beyond the 10% GST. Those costs accrue to the consumer, but the benefit accrues to the Canadian a retailer –the Myers and DJs – at no cost to the retailer and amounts to a tariff or subsidy to the retailers.

    The lower threshold in Canada applies to an unsolicited gift your brother in UK might send you – say a bottle of perfume. So you will end up paying GST plus huge processing charges on your xmas gifts from Aunty Edna in UK or USA.

    The $1,000 GST cross-border low value threshold (that’s its technical name iirc) has been examined at least once since it was introduced in 1995 – 15 years ago. It was examined as recently as Nov 2010 by the Tax Board, who concluded that since it was set in 1995 at $1,000 the inflation had eroded it substantially over those 15 years.

    I repeat I am sure the real reason for this campaign is to soften up the tax office etc for when Myers and DJs etc go online from China or HK. They want to be able to defend their move and be clear that the $1,000 threshold will stay – otherwise their move offshore will be a bit more difficult.

  31. Russell

    LO – so if you had a whole lot of people telling you “we buy online for these reasons (range, service etc)” you’d say to them “No, actually your decision if affected by that 10% – the laws of economics say so”

  32. Robert Merkel

    LO, don’t you know that only jobs in heavy manufacturing are real jobs? ;)

    There’s a couple of inter-related issues with the car industry, methinks. First is the national pride factor, which isn’t unique to Australia. You reckon our car industry is silly? I have an economist friend from Malaysia who went completely bonkers when the word “Proton” is mentioned…

    Secondly, the automotive industry is highly localized – meaning the pain of transition is concentrated. Furthermore (as I understand it, could be horribly wrong) it has a lot of workers who have worked for the same employer for a particularly long time, and for whom obtaining comparable employment will be much more difficult than, say, a chef who works at a restaurant that shuts.

    That’s my guess anyway.

  33. patrickg

    LO, whining about the supposed left support of the automotive industry especially stupid on this blog where there have been a number of posts criticising subsidies to australian auto manufacturers, with much support via comments.

  34. Francis Xavier Holden

    LO – just for the record:

    I’m against most of the nonsense in Oz that says,lets subsidise it because, if its made out of steel its real, if its a farmer running a business they need a subsidy, and real Australians don’t live in urban areas and therefore they need subsidies etc etc

    Pretty much all sensible Governments/Tax office/ Productivity Commission type reports worldwide recognise that collecting cross -border GST/VAT on small amounts is a lose /lose game for everyone – the only argument is where the “low value threshold” should be set.

    In 1995 Australia set it at $1,000 for good considered reasons – (that would be about $1,500 now??)

  35. Francis Xavier Holden

    The only possible “worst” outcome possible if somehow the Greens and Abbott got conned by Harvey and Myers etc would be lowering the Oz threshold for GST to around $400.

    Which would just mean a lot of buggerising around and wouldn’t touch the main online cross border transactions which are small items, books, CDs, bike parts, car parts, clothes, shoes etc.

    This is smoke and mirrors for a bigger game.

  36. Craig Mc

    The only way I can see that is that any goods you buy will need to be held at the post office (or courier) until you pay GST.

    In fact this is exactly what happened under the old sales-tax regime. It was a bit of a raffle as to whether you got hit – I only ever got stung once. Thereafter I ordered below the $200 mark to avoid being the nail that sticks out.

    Nice to know the threshold is $1000 these days!

  37. Tim Dymond

    ‘LO, don’t you know that only jobs in heavy manufacturing are real jobs? ;)

    I may be roundly abused for making this argument(probably accused of denigrating retail workers), but jobs created in the manufacturing sector are distinct from jobs created in other sectors. Specifically ‘making things’ adds value to our resources. Having a manufacturing sector creates skilled jobs, which mean skilled workers. Having such a workforce means workers are to take on a variety of jobs in your economy, not just move in and out of one low skilled sector. That way your economy is less vunerable to the highs and lows of (say) commodity prices. Car manufacturers undoubtably are making self interested arguments, but that does not mean they are wrong. Gerry Harvey et al aren’t wrong because they are self-interested, they are wrong because they have misdiagnosed the problems of the Australian retail sector.

  38. FMark

    I would have more sympathy for the retailers if they weren’t selling the same products, made under the same conditions of labour in China.

  39. CMMC

    It’s not about turnover for the retailers, it’s about their plummeting share values.

    They are all publicly listed companies, with shareholders bearing the liabilities.

  40. billie

    A contributor to an ABC blog by Zumbo said he was a small retailer who regularly imported product from online sources. His orders are less than $1000. He thinks that Harvey Norman is trying to drive small retailers out of business

    and the following
    Baz : 05 Jan 2011 1:07:26pm

    The problem with all these large corporations is greed – they want it all. Last year I had a shop in Westfield with gross sales of $2m per an. Westfield wanted a new lease for $1/4m per year plus new shop front. My gross profit was only 20% naturally I had to go.
    I now operate from a local shopping centre. But it’s impossible to survive I will close soon and 4 people will be out of work because people still flock to the large centres (only a few buy on line but it’s now part of retai)). The large retailers have a huge advantage – they pay less per sq metre rent because they are destination stores. Small retailers who offer value and service need to be supported and people should look at shopping locally if they are lucky enough to still have a local shopping centre. There’s more to life (and your community) than saving a few bucks. It’s hard to imagine your kids getting a part-time job at Amazon.com

    Robert Gottliebsen today on Business Spectator that Myer, David Jones, Coles and Harvey Norman have to cover their rent. He has forgotten that anchor retailers pay a reduced rent or no rent to attract customers to the shopping centre

  41. furious balancing

    I’ve imported a +$1000.00 item, ordered off the net. The paperwork is ridiculous – they haven’t even attempted to try and have an efficient system. I did it legitimately and paid my GST, it was a palaver, but it was still half the price of getting it from a local retailer who seemed incapable of answering even the most basic of questions about said product.

  42. Wantok

    On the subject of dodgy retailers, I went to get some petrol before Xmas at the Woolies petrol outlet and was told that my Rewards card had no credit yet I had just spent over $50 in BIG W. The servo lady told me that BIG W had dropped out of the petrol discount program but hadn’t bothered to notify consumers…………….only Woolies counts now.

  43. moz

    furious balancing: my experience was very different, perhaps because it was all done by the courier company. The only hassle for me was the extra few days delay and the $50 fee. But since I had realised I wanted several $1000+ I found someone to consolidate them and repost, using the customs-handlign courier, and the overall cost was slightly over half the Australian cost.

    There are a lot of Australian online shops around now, often run out of a garage or small industrial unit, where the prices are close to international and the support is from the overseas supplier. Many of them actually offer better service that b&m retailers because that’s what they have to offer – there’s no “reassuring” physical shop-front, the place is only manned when there’s something to do and you often can’t pick up your purchases even if you want to. All to lower costs. Which they do very well.

    It’s entertaining if you find the relevant forum online and read about the difference between the really cut-price places, and the “premium online” places where for 10% more you get dramatically better service. I had one guy post me a $2000 lens for a week because he didn’t have one in stock for sale, and when my one did arrive it had a courier bag to return the loan lens. That sort of service cost me about $55 over the lowest price I could find online, but of course an international seller is never going to do overnight to my door.

    That sort of thing has really pushed prices down in the local retailers, but interestingly most of them do it by having a price-match policy on their website which they don’t mention in-store. You have to ask. So you can get the dodogy-online-grey-market-import price from a physical shop, but only if you do a bit of research. Beats going to Hardly Normal and paying extra to have some spotty teenager look at you blankly when you ask a question then try to upsell you a Mack warranty (or some other ripoff extra).

  44. furious balancing

    I had to register as an importer, and then there was some problem with the forms too. I was surprised that I couldn’t get it done with an online transaction through customs. So – it went something like this: print forms, fill in forms, go to post office, get some form from the post office, send form, wait for advice on amount to pay and how to pay it, pay it, and wait a few more days for the product to be released from customs.

  45. marks

    A complicating factor is that other countries may charge GST/VAT on items (the eu has a plethora of rates, thresholds depending on whether you are a tourist or not, refund procedures).

    It would be unfair to charge GST in Australia when it has already been paid in some other country…unless of course the major importers also pay that tax. Getting complicated.

    Also, there are schemes whereby some countries refund VAT for overseas purchases…but you have to apply for it in some cases. Some people are not aware of this. Eg Amazon in its fine print from some despatch points say you have to email them with the invoice details. How many people know that?

    I suspect that there are many out there who are already paying foreign GST/VAT who do not need to. If those people become more savvy – and they will as they purchase more, they are likely to reduce their costs even further – GST or no.

  46. Mr Denmore

    Doesn’t anyone else find it ironic that after decades of being lectured by big business interests about globalisation and competitive forces unleased by new technology, consumers are now being asked to pass up the opportunity offered by the very same forces to take advantage of lower prices?

    It seems it is OK for Harvey Norman and the big stores to push for lower wages and the dismantling of work protection in the name of productivity and competition, but not OK for you and me to shop for the best prices online.

  47. fxh

    marks – the basic principle is that you do not charge non residents a consumption tax – gst/vat =a consumption tax.

    Therefore my UK purchase is VAT free at post in UK and would only trigger GST when I get it in Australia. However below $1,000 in aud is considered low value- that is it would cost more to collect the GST than it would raise in revenue.

    So I don’t pay GST on my UK purchase – either in UK or in Oz.

    Its not illegal, its not sneaky, its not sleazy, its not a loophole, its not unaustralian – its not some weird internet thing – its perfectly legal, its explicit, its spelled out, its mainstream, its common practice around the world.

  48. JoeG

    I think that we can be pretty sure that the retailers will be claiming the cost of their ads against their tax, even though these ads are not a cost of doing business. It would be nice to think that the Tax Office would be looking at disallowing such deductions, and the Govt supporting the Tax Office with threats to change the legislation.

  49. Ute Man

    Gerry Harvey is a tool. In 2007 he was calling for a two tier wage system and a reduced workers visa so he could sack all those workers he is suddenly so concerned about.
    (sorry about the Newscorp link)

    Screw you Gerry

  50. Alexis

    You could go out and give $1 million to [big box retail dinosaurs] tomorrow to help [me buy racehorses]. You could argue that it is just wasted. [I am] not putting anything back into the community. It might be a callous way of putting it, but what [am I] doing? You are helping a whole heap of no-hopers to survive for no good reason. [I am] just a drag on the whole community. So did that million you gave [me] help? It helped to [buy me racehorses] but did it help our society?

    Points if you can identify which disadvantaged group Gerry Harvey was originally talking about!

  51. Fran Barlow

    It seems to me that the administrative complexity and the transaction costs probably aren’t going to warrant such a measure and politically, this would be far more damaging than the RSPT.

    I’d say the chances of this one getting up were very poor indeed.

  52. Labor Outsider

    “It seems it is OK for Harvey Norman and the big stores to push for lower wages and the dismantling of work protection in the name of productivity and competition, but not OK for you and me to shop for the best prices online”

    It is perfectly fine for you to shop online Mr Denmore but it less fine for you to pay no tax on those purchases when the equivalent purchases from Australian retailers are taxed.

    Tim – car manufacturers are wrong because tariffs are a large effective additional tax on consumers that imposes a large efficiency loss on Australia. Most of Australia’s value added does not come from manufacturing and never has. Manufacturing jobs are not the only, nor even close to being the most skilled jobs in the country. Countries such as Germany and Sweden have far more productive manufacturing sectors than Australia and are not protected behind a tariff wall. And there is no evidence that manufacturing workers are more able to move between sectors of the economy than other workers. Indeed, Australia’e experience has been the opposite.

    Russel – I’m going to step you through the argument again. There are a variety of factors that affect demand for a particular good. Price is just one of them, but rather important. Holding those other factors constant, if you make a policy change that changes the relative price of a good relative to its substitutes (as levying the GST on foreign online retailers would) then the relative demand for that good will fall unless there are no substitution possibilities (demand is inelastic). Demand for goods sold by online retailers is certainly not inelastic so the argument simply does not hold. Now, all of this does not mean that the demand would go to zero – the price differential is often much larger than the tax and as many have pointed out, there are other benefits from using foreign online retailers. But demand would be affected.

    Patrick G – so the support for tariffs on the left is “supposed” now? I must have been dreaming at all those ALP conferences where members of the left and affiliated unions rallied against tariff liberalisation. I must also have missed all those Bob Brown press conferences demanding greater liberalisation of Australia’s tariff regime. And while you are right that Robert has posted a number of times criticising auto subsidies and tariffs, I’d say that support for those views has, overall, been fairly lukewarm on LP.

    So, I don’t see any problem with pointing out that there is a bit of a disconnenct between the enthusiastic support for globalisation and international tax arbitrage in this instance, and the fairly common distaste for the same thing in other instances. As was pointed out further up the thread, one of the advantages the foreign online retailers have over domestic retailers is that they are subject to lower regulatory standards and lower minimum wage laws. Now, that doesn’t particularly bother me, because I think Australia’s regulations are too onerous, but the next time I see a thread on LP decrying the impact globalisation has on the wages of low-skill workers in Australia I’m going to puke at the hypocrisy.

  53. Jacques de Molay

    “Harvey hurt by buyer backlash”

    THE Harvey Norman founder, Gerry Harvey, will step back from the retailers’ campaign for GST to be imposed on overseas online purchases, saying he is hurt by the avalanche of criticism directed at him and feels that getting involved was ”suicidal”.

    http://www.smh.com.au/business/harvey-hurt-by-buyer-backlash-20110106-19hjx.html

    Hopefully this prick pulls his head in future. His comments about the homeless were even more embarrassing than this backfiring stunt.

  54. Paul Burns

    Nowadays I buy most of my books on-line. Most of those books, as I’ve mentioned before, are out of print or print on demand abd can’t be got for love nor money in Australia. They are also heaps cheaper.
    I’m even thinking of getting a couple of DVDs on line, specifically, Red and Quo Vadis? both of which are impossible to get in Australian stores.
    Good to see you back, Ute Man. Drop round for a cup of coffee.

  55. Paul Burns

    Oops! Reds, I meant.

  56. MikeM

    A point that has not been mentioned is that Harvey Norman has a business model that makes it almost impossible to sell efficiently online. Most of his stores are franchises. While the key to competitive online is an efficient, centralised (maybe even offshore in Malaysia or Thailand or China) order fulfillment function.

    But this cannibalises sales through the franchise outlets and the franchisees will go ballistic.

    The franchisee problem is also the reason that you cannot buy a new vehicle online.

  57. Andrew Reynolds

    LO,
    I would agree with you wholeheartedly on the low skilled question. Try telling any of the guys involved in the mining industry in WA that they are low-skilled and add little value to the production process.
    Go on – dares ya.

  58. Francis Xavier Holden

    MikeM – Yes. This is something the media hasn’t explored.

    Harvey Norman hasn’t been be able to offer effective online retial and won’t be able to adapt as their model precludes it.

    HN the company is essentially a franchise retail conglomerate and retail property owner/leaser. HN basically selects “prime” retail sites, develops them and populates them with a bunch of franchisees whom sell different things, beds, furniture, computers, white goods.

    Their notion of service is a bastardised version of what the term should mean. Their notion of service extends to superficial customer focus up until the moment of sale and focused only on the completion of the sale. This sale will, very often, include the sale of finance to the customer.

    As a side issue: Any idea of follow-up serve or ongoing customer loyalty or relationship is missing. HN and most (not all – Bunnings is an exception) other big box or category killers retailers built their business on price and price alone. To now whinge that others are doing the same (and often adding superior service) is at best disingenuous at worst dishonest.

    Getting back to HNs model – it is a model that does not translate to online selling. This is why HN twice had a half hearted go at setting up online. Harvey doesn’t get the net shopping because his retail model is the antithesis. His model is based on cars, parking lots, buildings, property returns and essentially no customer focus. The franchise model is too fragmented to do online retailing successfully. The reliance on returns from property don’t jibe with online retailing.

    Gerry Harvey will never be successful at online retailing. He will see online retailing as unfair, not playing by the rules and he will remain bitter because he does not and cannot understand it. He is going through what the other retailers went through when he first started up his model – when you don’t and can’t understand it – the new model always seems unfair.

    The big department stores like Myers and DJs will, eventually, be able to compete successfully online. Their model is different.

    I must say it is amusing to see Gerry Harvey saying today on the papers that he is hurt by tall the comments online and in talkback radio. Its easy to sling ignorant comments around when you have an army of PR people and sycophantic TV media who depend on your ads for an income. When the internet or talkback radio give the informed public a chance to comment – it seems unfair.

    Welcome to competition and 2005 Gerry.

    Something’s happening – and you don’t know what it is – do you Mr Jones.

  59. Francis Xavier Holden

    I just heard Gerry Harvey on the news whingeing about the feedback he’s getting.

    He can dish it out one way but can’t take it at all.

    What a big sook.

  60. Patrickb

    @53
    You don’t need to get into an academic argument. As has been pointed out many times here the costs of collecting the tax would be prohibitive. I think common sense would be enough to work that out. And it looks like genius Gerry has worked it out. The SMH reports that he’s bailing out of the campaign. Apparently he’s been emotionally scarred by the backlash. I’m not sure where he gets the idea that most Australians see him as some kind of retail Jesbus anyway. He’s basically charging too much for stuff. If it wasn’t for the interest free terms then he wouldn’t have a business.

  61. Patrickb

    @58
    I think LO would require a bit more academic rigour. Having a mining-man-love fixations isn’t going to cut it.

  62. Francis Xavier Holden

    Shop Distributive and Allied Employees Association national secretary Joe De Bryun said he doubted the retailers’ predictions of widespread job losses and said they were using estimates that 30,000 jobs could be lost from the sector for “dramatic effect”.

  63. paul of albury

    LO, what I can remember of complaints about globalisation have been mostly about its effect on workers outside Australia. Australian manufacturing seems to have been mostly abandoned before blogs appeared, apart from special pleading by industry and local interests such as the SA car industry.
    From my own perspective the problem with globalisation is that it has been limited to capital – the workers (outside Australia) who it exploits are not very free to shop for a country of residence which offers better conditions, unlike the capital that employs them.
    Protection vs Free Trade is not a left vs right issue. Historically the UAP was a merger of both, many leftists are also Internationalists.
    And online shopping is a step towards more democratised globalisation – you don’t have to be as wealthy as the Harveys to escape the restrictive retail market in Australia

  64. Tim Dymond

    ‘Try telling any of the guys involved in the mining industry in WA that they are low-skilled and add little value to the production process.
    Go on – dares ya.’

    I knew the debate would get juvenile. Of course the mining industry employs highly skilled people, the point is that while it generates plenty of wealth (for some people) it does not generate plenty of jobs. The issue here is what sector can generate larger numbers of skilled jobs in Australia.

    ‘Countries such as Germany and Sweden have far more productive manufacturing sectors than Australia and are not protected behind a tariff wall.’

    Other countries historically have had plenty of state sponsorship and protection of their manufacturing sectors in order to build them up. Their advantage lies in having utilised protection better than Australia – not in having no protection at all.

    ‘And there is no evidence that manufacturing workers are more able to move between sectors of the economy than other workers. Indeed, Australia’e experience has been the opposite.’

    From the Fair Pay Commission’s study of labour mobility and low paid workers:

    ‘Persons employed in manufacturing, transport and service industries are more likely to change industry’

    http://www.fairpay.gov.au/NR/rdonlyres/72E677A2-3F82-4E10-A7B2-5A9320A36709/0/Labour_Mobility_and_lowpaid_workers_report_5_09.pdf

  65. Russell

    “Russel – I’m going to step you through the argument again. There are a variety of factors that affect demand for a particular good. Price is just one of them, but rather important… demand would be affected”

    LO – all I’ve heard from people, and comments on this blog, is that the 10% GST difference is not a rather important factor in their decision to buy online, and so I don’t believe that demand is being significantly affected. That’s why your argument that the tax difference is unfair to local retailers doesn’t apply – if it’s insignificant and not affecting their trade, it’s not unfair.

    But I do prefer to buy local and I would like the car I buy to be made here. Unlike you I am bothered by “lower regulatory standards and lower minimum wage laws” as well as OH&S and environmental standards in developing countries. Also, as in an ecosystem, there’s strength in diversity, and a community needs a good range of occupations: skilled, unskilled, agricultural, industrial, academic, creative ….

    Though I think economic globalisation has reached unsustainable levels I do buy online – after years of trying to get what I wanted from local retailers, and not being able to.

  66. Fine

    BTW, a friend has done some spadework going through racehorse yearling sale statistics and worked out that Harvey has spent $67 million on the purchase yearlings in the past five years.

    I don’t have anything against that. Horse-racing is an industry and he’s pumping a lot of money into it, but gee, he can afford to lose a lot money. Don’t come crying to me, Gerry.

  67. Labor Outsider

    Tim, there is a rather big difference between who actually moves between industries and who is able to move between industries. For example, if manufacturing workers are more likely to lose their jobs than government workers, then you will find them moving between industrial sectors more simply out of necessity. That study of HILDA data is simply tracking movements, not the transferability of skills. A better indicator of skill transferability (which is what is more closely linked to your original point) would be to look at who finds it easier to find alternative employment after losing a job. Australia’s experience in the 1980s was precisely that manufacturing workers that lost their jobs in the restructuring of that era found it very difficult to find alternative work in other sectors of the economy.

    Russel, how representative a sample do you think LP readers and your friends are? A 5 to 10% change in relative prices is likely to have a significant impact on demand because the demand for foreign online goods is likely to be quite price elastic. You certainly can’t refute the point by pointing to what commenters on a blog say!

  68. Russell

    “You certainly can’t refute the point by pointing to what commenters on a blog say!”

    I can say that the applicability of your equation is limited, because it doesn’t take into account the significance to people of other factors which are in play. But then, that’s true of so much of what economists say.

  69. Andrew Reynolds

    Tim,
    Perhaps relative juvinility can be judged better on content than on word count.
    If you are looking for highly skilled jobs then there are few more skilled than market traders – and those skills transfer really well into just about any market. Computer programming manages to employ hundreds of thousands in several counties today. There is nothing more magical about bashing metal into shape over (for example) nursing, teaching, selling, transporting or mining.
    All of these are essential to a modern economy with the current high living standards.
    You can make all the stuff you want, but if you are not educated, in good health, able to buy, transport or make it then you can bash all the metal you want but it will not really help at all.

  70. Labor Outsider

    And Tim, when you say that mining doesn’t create many jobs, you are wrong because you are ignoring all the indirect employment effects from the commodity price boom.

    And are you really going to tell me that the reason why Sweden’s manufacturing sector is much more efficient and dynamic than Australia’s is due to previous state support? Sweden never had the levels of protection Australia had during the 20th century. Indeed, that lower level of state support is a key reason why the Swedish sector was more successful.

  71. Tim Dymond

    ‘A better indicator of skill transferability (which is what is more closely linked to your original point) would be to look at who finds it easier to find alternative employment after losing a job.’

    It is true the study is a bit too big picture to look at specific skills, however it does look at occupational mobility. It concludes with almost exactly the same sentence:

    ‘Persons employed in manufacturing, transport, and service industries are much more likely to change occupation’

    The study also shows a lower rate of occupational mobility for lower skilled workers.

    ‘Australia’s experience in the 1980s was precisely that manufacturing workers that lost their jobs in the restructuring of that era found it very difficult to find alternative work in other sectors of the economy.’

    Indeed! if you are going to just let Australian manufacturing disappear because free trade is great mate – then you will have a less diverse and flexible economy. Which will make changing jobs a lot harder. Manufacturing has an ageing workforce and declining employment numbers, yet it is the third largest employer of apprentices and trainees in Australia. Maunfacturing performs a role in the labour market that is valuable on its own terms, which is why governments have implemented policies to sponsor and protect it. You can argue about the quality and effectiveness of those policies, but it is simply not the same argument as the one about whether Harvey Norman, Myers, and David Jones should get a new tax policy that punishes consumers but does nothing to benefit the sector as a whole (i.e. the small retailers), and by extention the economy as a whole.

  72. Labor Outsider

    That is rubbish Russel – when economists estimate demand functions they take into account as many factors as possible precisely to try and identify the independent effect of each factor. What you are saying, that the price elasticity of demand for foreign online goods is low, would fly in the face of all the comparable empirical research I have seen. But sure, you stick to your anecdotes.

  73. Labor Outsider

    Tim, Australia’s economy has become more dynamic and flexible since the manufacturing sector has gone into relative decline, not more. Indeed, the very policies that protected the manufacturing sector historically were an important factor holding back the dynamism of the economy.

  74. Andrew Reynolds

    True,
    LO – but a 10% price increase is not going to change my purchasing pattern when the price differential is 40 or even 50% – and with a much better range.
    What might do it is the added PITA factor of having to go to the post office to argue over the price of the goods purchased, particularly when overseas vendors, unbidden, routinely put “Gift” with a value of “$10″ on goods that I paid $100 for off eBay. Gerry Harvey and friends know this well and, IMHO, this is the whole point of their campaign. They know they cannot compete on price, even after the GST is put on, so they are trying to make it a pain in the arse to get things in to Oz.

  75. Russell

    “economists … take into account as many factors as possible”

    Yes, we’ve seen recently how successful they’ve been at that. Seem to have missed a few factors.

    I haven’t been talking about prices, but other factors, such as that the goods aren’t available in Australia and that local retailers don’t operate comparable online purchasing facilities. Don’t you think that those are more significant factors for people buying online, than the 10% GST price difference?

  76. Alexis

    When the average retail markup in Oz can reach 100 to 200 per cent, e.g. as it is on books, an extra 10 per cent tax won’t make a dent in the popularity of imports.

  77. Tim Dymond

    ‘Tim, Australia’s economy has become more dynamic and flexible since the manufacturing sector has gone into relative decline, not more.’

    Dynamic and flexible? We have lucked out with resources booms while our productivity growth has stagnated. Of course mining creates jobs in other parts of the economy through the multiplier effect – but if that is your criteria then we could also achieve the same result by regularly dropping money from helicopters across the country.

    Sweden did use protection for a while in the 1890s – and the point is when they weren’t getting what they wanted out of it they moved to different policies that supported manufacturing. Those last two words are crucial. I agree that the old tariff system had plenty wrong with it – the problem is that governments decided that all they had to do was drop protection and everything is hunky dory. What these countries decided was that it was good to have a manufacturing industry on its own terms. It is good to have retail services industry as well – but the Harvey et al proposal should be rejected because it does nothing for the sector as a whole.

  78. Andrew Reynolds

    Tim,
    So get out there and bash some metal, then. Obviously typing on a computer creates less value than that. Imagining that mining something creates as much wealth as printing money shows that understanding economics is not your forte either.

  79. Labor Outsider

    Russell, I think you are confusing microeconomists with macroeconomists. I’m not sure I said anywhere that in this instance the tax was the most important factor affecting relative demand. All I have pointed out is that demand is somewhat price elastic and that it is a reasonable principle of taxation that equivalent goods and services be taxed in the same way.

  80. Russell

    LO you wrote in #67:

    ” A 5 to 10% change in relative prices is likely to have a significant impact on demand because the demand for foreign online goods is likely to be quite price elastic.”

    In this instance I think you are misapplying your rule – online shoppers aren’t doing it for a 10% saving, but for other reasons, so the whole thing is a furphy.

  81. Steve D
  82. Labor Outsider

    Russel, I think that some online shoppers are doing it for other reasons and some are doing it for price. For those doing it for price, it will matter.

  83. Grumphy

    Heh. After seeing the thousands of comments dinging HN’s poor in-store service, I’m guessing that HN employees are going to have a very uncomfortable time over the next few months :P

  84. Alexis

    No it won’t, Labor Outsider. Not unless you plan to charge 100% GST. You’re ignoring the fact that the average markup is far, far in excess of 10%. GST won’t stop me, nor anyone I know, shopping at Bookdepository. Not unless you made the act too physically painful to comply with. Which is the retailers’ real goal of course!

  85. Alexis

    Indeed, Grumphy, at my local HN they all looked rather glum today, when I went in to browse and touch things and generally not buy anything.

  86. Grumphy

    Speaking of online bookshops, I did the right thing and tried using an Aussie online business for Christmas this year. The prices were good, but two of the books only turned up yesterday, and one went out of stock in the ten days between me placing the order and them finally filling it. Irritating as that is, I kind of understand why – ordering and mail systems do get overloaded this time of year, and as far as I can tell this business actually had to arrange for at least one of the titles to be brought in from overseas, because like many titles, its not printed or kept in stock locally. That said, I think maybe they’re short on staff.

    So there it is. I did my best, but still wound up with a poor customer experience and I had to revert to Amazon for the third book.

  87. Andrew E

    Sounds a lot like the final par under point 3 in this.

    You only buy books from Australian bookshops if they’ve been written by Australian writers and published by Australian publishers. Any book outside that criteria – and it’s most of them – you may as well order it from its source.

    This could be the start of a trend where retail workers become better skilled and more knowledgeable about products. If I relied upon retail as the most important means of getting my stuff to customers, I suspect I’d have to look seriously at training/motivating their staff to sell my product too. The only industry that does this currently is a big mark-up industry, cosmetics.

    Alexis, I don’t think LO is ignoring the price differential at all.

    Tim@77: compared to where it was under Treasurer Howard in 1982, “dynamic and flexible” is more than fair.

  88. Chris

    Re books – I think the high prices are due mostly to the parallel import laws not retail markup or gst. It was a very poor decision of Labor not to accept the advice to allow book stores to parallel import. Furthermore with delivery of digital goods over the Internet – eg ebooks, music, videos there’s almost no chance of the govt getting gst when people buy from overseas

  89. Alexis

    Labor Outsider might not be ignoring it, Andrew, but he/she isn’t really addressing it, either. Let’s say a new release hardback retails for $55 in Oz, but I can obtain it for $18.10 online (not a made-up example). That’s more than a 200% markup.

    Vs. a potential GST of $1.80 or markup of 10%? That’s not even a significant difference, so I don’t know how LO can believe that the cost would have a significant dampening effect on demand. The retailers know it just as much as online consumers do. That’s why their real goal is to make those transactions burdensome in terms of non-price costs.

  90. Russell

    “You only buy books from Australian bookshops if they’ve been written by Australian writers and published by Australian publishers”

    That’s the position I’ve come to too. I seem to have a read a lot of memoirs this year: Anna Goldsworthy’s Piano Lessons, and Robert Dessaix’s Arabesques I bought from my local independent bookseller. But when I asked about Nigel Slater’s Toast, or Edmund de Waal’s The Hare with the Amber Eyes, they had never heard of them, and in one case I was told by the assistant, after he consulted his computer: “You must have the title wrong, there’s no such book”. So those two came from bookdepository – and probably at about half the price a local bookseller would have charged. Maybe it’s rents that contribute to the high price of books here?

    BTW all of those books are recommended as ‘enjoyable’. Did LP have a ‘best books of 2010′ thread?

  91. moz

    Russell, I’ve also had the experience with a CD shop of the owner telling me to buy online because the distribution chain from that source was so awful that he couldn’t guarantee to have the CD I wanted within 6 months and to avoid that he would likely just order it online and mark it up to me, so I might as well do that myself. I got the impression that if it wasn’t such a major source for him he would cheerfully refuse to have anything to do with them. Their approach was very “this is what we have in Australia, buy it or JFO”.
    Admittedly that’s a shop that I buy at least 10 CDs a from so he’s got something to gain by keeping me around, and he knows that.

  92. Wozza's ghost

    FXH @63, yes, the union trying to pour cold water on the argument is interesting. As a number of commenters have pointed out, the larger issue is not just the GST but the way the general crapness and exorbitant prices of service industry, particularly the large retail sector, in Australia, of which the GST is only a part, drives people to online shopping. The union’s part in driving up costs, exacerbated recently by Fair Work, might come under scrutiny if the debate developed, and I don’t think they would want that.

    Also what others have said re the current situation being an example of the free market and globalisation, those traditional anthemas of several commenters who are now weighing in against Gerry Harvey trying to force changes, working for consumer benefit. To claim that that is no contradiction because it is billionaires who are suffering from globalisation this time suggests a position driven largely by envy politics.

    I don’t understand the analogy with the “rent seeking” campaign of the miners. If anyone is seeking rent in the mining tax debacle it is the Government.

  93. Patrickb

    @67
    “Russel, how representative a sample do you think LP readers and your friends are?”
    Well I suggest you read a few more blogs, the SMH has plenty of anecdotal evidence for a significantly greater than 10% saving. I really thing you push the Austrian purity thing a little too far.

  94. Patrickb

    “Russell, I think you are confusing microeconomists with macroeconomists.”
    Dear Bog, have you actually been to 21st Century and B&H? These places are retail chaos, no room to move as people from the four corners of the globe bludgeon each other over a bargain. Myer or DJs or HN by comparison is like some sort of pleasant Quaalude wonderland where you hand over cash to superfluous attendants and then wake up at home with an interest free loan for far too much. It’s all about competition, I’m surprised you don’t get it. But then talk or micro/macro – economists is unlikely to reveal much about lived experience.

  95. Angharad

    I’m an online shopper for some things, but make a judgement about what I buy on-line and what I prefer to buy face-to-face. For example, I bought my latest bike from my local bike shop plus all the bits and pieces. I could have done it cheaper on-line and just got them to assemble it, they offered, but I decided the relationship was more important.

    But I buy lots of consumables, mostly that the lbs doesn’t sell,on-line and mostly from the UK and the US. I can buy some of that on-line in Australia but their on-line presence, range and service isn’t great and a favourable exchange rate makes buying “Australian” a poor choice. I like the UK site I use most alot. It uses all the best of social media to inform customers. Extensive customer reviews, both positive and negative, great feedback, excellent service and no deliver over a certain amount, plus all the prices are in AUD for Australian customers. That sums up why I use that site. If I paid GST on top, it would still be cheaper but the service experience is better.

    As for the issue of labour and where it is sourced, my last invoice had the country of origin for all the items. Nothing came from the UK, lots from Asia. Apart from the inefficiency of shipping it from Asia – UK – Australia, not much difference from anything I would buy here. I dont think Australia is about to develop cycle componenty to challenge Shimano or Campagnolo any time soon but, you never know ;)

  96. tssk

    We’ve bought online DVD’s, books and games when they just aren’t published or distributed locally. We’ll still pay the over the 50% charge to buy local when we can but when you have games where the first two parts of a trilogy are released here but the last bit isn’t you can see why I’d buy overseas.

    Of course one can play the waiitng game and I have done that with some games. In 2008 I was finally able to buy one game locally in a newer format. The waiting game paid off. When was it originally published? 1995.

    I’ve decided when possible I won’t wait over a decade again if I can help it.

  97. The Lorax

    For once in my life I agree with Labor Outsider.

    Of course this is rent seeking by Gerry Harvey and the other big retailers, but it doesn’t change the fact that local retailers are unfairly taxed. I don’t know how you could possibly argue otherwise. Local retailers may well be lazy, inefficient and incompetent, but they still deserve equal treatment by the tax system.

    The main argument against seems to be high administrative costs, but AFAIK the Brits have to pay VAT on all goods imported into the UK. Why can they do it in the UK and we can’t?

    The real reason nothing will change in Australia is because a new tax will be hugely unpopular, and our current government isn’t exactly courageous. Aussies are loving the strong dollar and we’re entitled to gorge ourselves on cheap imports. Meanwhile, our non-resources exporters wither and die.

    The Australian economy is eating itself alive.

  98. paul of albury

    Lorax (and LO). I have to agree that non payment of GST on imports is silly. But the GST is deliberately a big dumb tax. And to the extent it is about redistribution it was about moving taxes from progressive income tax and luxury purchases to things everyone including the poor needed (regressive) – admittedly the democrats ameliorated this when they sold out. Dumb things are intrinsic to it.

    A 10% GST is not enough to make the retail coalition competitive. What they want is a flat $50 charge on all overseas orders along with an extra processing delay. This *would* make a substantial competitive difference.

    There are a number of misconceptions being peddled – that this is Labor’s fault (the GST, the original limit and the $1000 limit are all Liberal decisions), that there’s a loophole for multiple sub $1000 imports (customs reserves the right to aggregate multiple purchases where source and destination are the same).

    We hear about poor shopkeepers who have ‘customers’ look at products in store and then buy online but not customers who (try to) buy products in store that they’ve seen online

    If there was a way to close this exception without requiring a disproportionate fee and extra delay (and without creating a huge increase in public servants to collect it and a future gold mine when someone decided to ‘privatise’ gst collection to one of their mates) I’d happily accept that. At the same time the (economically irrational) allowance I make in comparing Australian prices to offshore would shrink by 10% – I’d say for me this now sits at around 40%.

    But the point of the present campaign has to be setting up a big bureaucratic barrier – the price differential is so great that 10% really is totally irrelevant – LO I suspect the economic models assume a basically competitive market – Australian retail isn’t. They also assume you can find what you want locally!

    Most Australian retail and their wholesalers want us to buy what they want to sell us, at the price they want to set, delivered according to their convenience. Online shopping has given us something better, but now Gerry wants to take it away. The outrage against him is hardly surprising..

  99. The Lorax

    Paul, I am told the way it works in the UK is the courier leaves you with a VAT invoice for the imported goods. That doesn’t seem overly burdensome to me, and there is no delay in delivery.

    Am I the only one who worries that Australia wants to offshore absolutely everything, even retail? We are rapidly becoming a nation of domestic service providers and welfare recipients supported by mining income.

  100. paul of albury

    Lorax, as a customer I could accept that method but I think that’s where the tax dept believe they would lose money. While $50 seems excessive I expect they’ve costed inspection, assessment and collection as costing something close to that. So either they bill the customer or the government loses money by collecting tax. It’s a silly situation for which the great tax architects Howard and Costello are to blame.

  101. marks

    The VAT rate in the UK is 20%.

    That probably does make it economical to collect.

    However, I suspect that Gerry Harvey and Co are more after the likelihood that imposing a GST will seriously extend the delivery time due to the need to assess and collect. If a quick and efficient way of collecting the GST were to be found, I would be willing to bet that G Harvey and Co would lose interest since their margins are so much higher. They are seeking to nobble the competition on delivery times, not cost, since they are already way way more expensive than the GST difference.

    Also, G Harvey and larger stores have had an advantage due to economies of scale. They have used those economies of scale to extinguish their competition.

    The uneconomical nature of collecting small GST amounts from overseas is a diseconomy of scale is it not?

    So when a circumstance of economy of scale is unfair to small retailers, according to GH et al, bad luck to the small retailer. When a circumstance of economy of scale is unfair to large retailers, the gummint orta do something about it?

    Sounds like GH is just making excuses so his shareholders don’t hold him to account for his business’s poor performance. Cynical me.