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Applying GST on overseas online purchases is moronic

December 6, 2013

06 December 2013

Terry McCrann, business editor of Melbourne’s HeraldSun, has had a change of mind on the GST when it comes to applying it to online purchases. Before he was content that it applied only to purchases over $1000. Now he wants it on everything.

The reason the GST had the $1000 threshold was that it was too costly to collect. What’s the point in collecting a tax if it ends up costing more than the revenue gained? Wisely, the federal government hasn’t bothered, all to the net benefit of the taxpayer. McCrann suggests forcing overseas retailers to collect it, then remit it to the government. As if. This is not Amazon in USA as McCrann cites as an example for its collection of state taxes. There’s a myriad of international online options, most of which are small and exclusive, and they’d just as soon dump Australians from buying from them rather than mess around with a bullying foreign government.

McCrann’s second point is about fairness, citing one coffee store selling a cup with GST, the other 100m away forced to pay. Naturally the business without the GST will sell more coffee, earn more profit, and still be ahead even after paying corporate tax on the extra profit. Except, we’re not talking about shops within eyesight. We’re talking about thousands of miles of ocean away and a coffee shop most likely selling different varieties. Retailers like Harvey Norman have been whingeing about the GST issue for several years, and just be exposed as greedy, spoilt brats out of touch with the modern world.

The simple fact is that the GST is irrelevant to the concerns of an online shopper. Besides, any shipping costs typically absorb any GST “saved”. The primary reason for shopping online is variety and availability. The other main reason is severely lower prices.

If you’re saving 40%, paying 10% GST won’t make a difference to your motivation to buy online. Especially since that value with addition of GST will be much lower than if the product were bought in Australia. If Australia’s price is $100 (includes GST already) and the overseas price is $60, customs would charge 10% on $60, so still only $66 compared to the $100 here. If the price difference was only the GST percentage, say $90 overseas for a $99 total with GST added, and $100 here, or even slightly higher in Australia, the shopper would not bother online. They’d buy it here and be proud do to the local retailers a favour and enjoy the comfort of acquiring their item immediately.

As for choice, only today I had two CDs arrive from Estonia. Not because I wanted to cheat the federal government out of a few dollars of GST, I had no choice because this was a local artist and the items can only be bought from Estonia. Considering the CDs were 15 Euros each and the shipping was 23 Euros, that worked out to $80 AUD. Oh, if only I could buy these CDs in Australia, I’d pay 100% GST and still be ahead.

There’s a third consideration that McCrann missed: often an Australian shopper pays GST or VAT on the product in the foreign country. Given the free market and international commerce ideals of a business guru like McCrann, you’d think the real solution is for Australian online sellers to charge GST to shoppers buying from overseas. Then you have your quintessential capitalistic system at work, delivering cheaper products to the consumer and lower taxes. Instead, McCrann wants to suppress international commerce by forcing Australian shoppers to be charged the costs for customs to open every single package so GST can be charged on top of that.

Can you really imagine a customs official spend 15 or so minutes to open a box with a CD in it, calculate and administer the GST charge, and then reseal the box, just to earn a dollar or two for the government? It’s ludicrous. Keep the threshold at $1000. Removing it won’t affect a shopper’s motivation, nor is it financially viable given the costs involved. McCrann ought to wise up to his basic principles of open and free markets, or maybe he’s been hanging around too long with dinosaurs like Gerry Harvey. Harvey’s problem is that his prices are way too high, even by Australian standards.

Source: http://www.heraldsun.com.au/business/this-is-why-i-changed-my-mind-on-gst-for-online-purchases/story-fni0d8gi-1226775397238

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