How extending GST on international online purchases affects Australian e-commerce

Australians who enjoy the tax-free experience of shopping online with overseas retailers may soon be in for a surprise. The government has proposed extending GST to international online purchases and lowering the tax-free threshold from $1,000 to as little as $20. Will this make Australians more likely to spend their dollars at local e-commerce retailers?

Not necessarily, says Paul Greenberg, CEO of the National Online Retailers Association.Greenberg, who also co-founded, shares his views on what the proposed tax changes might mean for e-commerce retailers and consumers.

What are the advantages of imposing GST on online purchases greater than $20?

I think the question is would it be good for society if we had another fair and legitimate revenue stream into the tax coffer? I think that’s the argument that the government is putting forward – that it’s a taxation equity conversation. All things remaining equal, this should bring a huge chunk of revenue into the tax coffers which keeps society ticking over – our hospitals, our schools and so on.

What are the drawbacks?

The Australian shopper will feel a little bit aggrieved by this. Shoppers have enjoyed this flat-world opportunity where we can buy anything up to $1,000 and it’s exempt from GST.

I also have a concern that the cost of collection would exceed the take. There’s a concern that the promise of billions of dollars into the tax pot would be offset by the expense of onerous collection mechanisms.

My other concern is that anything that impedes this terrific free flow of parcels across the globe slows it down and creates backlogs.

Are we more equipped today with technology that would make tax collection cheaper and faster?

The government is currently saying that there is technology that would allow the collection at the point of purchase, which would not impede the free flow of parcels. But I’m human and I need some proof.

My concern also is that retail is a diverse ecosystem and if we got Amazon, eBay, ASOS, Book Depository and the other big retailers to play ball, what about the other million retailers that are selling into Australia that might not play the game?

I do believe in technology and that there would be a solution to it, but I’m a positive cynic until I see it.

Would the proposed tax changes create a more level playing field for Australian online retailers and possibly lift their sales?

I think the impact will be negligible for both global and domestic retailers, but I would argue that domestic retailers have put too much into the levelling of the playing field being a trigger for more business.

I don’t think it’s a 10 per cent game.

I think you’ll find with Australian shoppers, if they have to pay tax on overseas purchases but they like the retailer and the service and the product and the brand, they’ll continue to shop there. I don’t think domestic retailers will feel any significant impact from an essentially punitive tax.

What do you think would be the impact of a lower tax threshold on international e-commerce retailers?

I think global retailers have been a bit concerned but I think the truth is that if shoppers like you, it won’t be a 10 per cent game that will turn them for or against you.

How can local e-commerce retailers improve their game to compete on the global stage?

I’m very bullish about Australian retail but, ultimately, are we meeting or exceeding customer expectations, particularly when they are benchmarking us against global retailers? And are we giving customers what they want and putting them at the centre of everything we do?

Powerful technology can help us, as well as recognising the power of brand and service.

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