THE nation's biggest retailers have launched a campaign against online shopping sites, calling on the Government to impose a GST on all goods bought over the internet - or remove of the GST from all products under $1000.
The new Retail Coalition which includes David Jones, Myer and Harvey Norman and represents 2211 stores that employ 76,000 people nationally says overseas retailers have an unfair advantage because they do not have to levy duty or GST on purchases under $1000, making online, off-shore shopping a cheaper option for consumers.
They have warned thousands of jobs are at risk if the Government fails to act, The Australian reported.
But experts are not buying message, saying the retailers' ideas to "level the playing field" between Australian businesses and internet shops are unworkable.
Instead, they say it is the strong dollar, not the GST-free threshold, that is currently making online purchases almost 40 per cent cheaper compared with October 2008.
Reducing the GST-free threshold on online sales would not be cost effective and removing the GST from local sales under $1000 would be too costly.
Retailers strike back
Myer chief executive Bernie Brookes criticised the Government's announcement of a Productivity Commission inquiry into the taxation of online purchases as a delaying tactic and said urgent action was needed to stop jobs from being lost.
Sluggish retail sales, heavy discounting in the lead-up to the Christmas sales period and a surging dollar have encouraged consumers to shop over the internet, devastating the retail sector.
In the ads, the Retail Coalition warns that failing to act "will see a reduction in hours and shifts for casual and part-time workers, and ultimately cost Australians jobs in retail, manufacturing, logistics and related services".
'Alarmist red herring'
Consumer advocacy group Choice described the retailers' campaign as an "alarmist red herring" driven by self interest.
"The big chains should recognise that it's their high prices, limited range and poor customer service that increasingly encourages people to use the internet," spokesman Christopher Zinn said.
Choice used the example of a digital camera (Canon IXUS 1000 HS) available online from Myer for $557. The same camera could be purchased though an Australian online retailer for $433.50.
Purchasing the camera from Hong Kong through a company with Australia-based sales staff would cost $346.
"Major stores are not being forced by anyone to charge these high prices," Mr Zinn said.
Academic Nigel Finch agreed that the campaign appears to be alarmist.
"The alarmist factor is that Australian retailers are being disadvantaged by this business regulation," Dr Finch, a Senior Lecturer in Accounting from the University of Sydney, said.
He said that consumers were merely taking advantage of a currency arbitrage between the strong Australian dollar and the weaker US currency.
The dollar is to blame
The dollar, which reached a 28-year high against the US last week, is the key factor hurting local retailers.
"The currently high Australian dollar is having an impact far greater than any issue of no GST of imports of less than $1000," said Sean Stephens, an economist at retail consultancy Essential Economics.
"Imported goods are now 39 per cent cheaper than they would have been in October 2008 based on currency movements against the US dollar.
"This is giving consumers some great bargains, particularly in categories such as books, clothing and electronics which can be up to 50 per cent cheaper than from Australian-based retailers for equivalent goods."
"We can expect that over time the exchange rate will return to lower historical levels that will do far more to reduce the current price disparity than any changes to GST arrangements."
'Not administratively feasible'
The logistics and cost of removing the GST-free threshold for online sales was considered to be "not administratively feasible" in a review by The Board of Taxation last year.
Last year, The Australian Retailers Association estimated that the Government could be losing up to $600 million in revenue due to the GST-free threshold of $1000. Yesterday, Myer's Mr Brookes said the figure was up to $2.5 billion in lost revenue.
Head of Consumer research at Deutsche Bank, Paul van Meurs, said that Government might increase its tax take but it might not increase local retail sales.
"(Removing the GST-free threshold) would actually raise revenue for the Government because they would now collect duty on on-line purchases as well under $1000,"
"Impossible to know what impact this would have on demand for online products but often the price differential is significantly higher than the tax differential alone."
Another unfeasible idea
The experts were most critical of the retailers' demand that the playing field be leveled by removing GST from Australian sales worth less than $1000.
In their ad, the retailers say that if the Government does not want to impose GST on internet purchases - currently exempt from GST and import duty if less than $1000 - it should not impose it on domestic purchases.
"I am sure it is possible (some goods like food already don't attract any GST) but it would be highly complicated and this would result in a significant reduction in revenue for the government. Most retail purchases are below $1000 - to not charge duty on these items wouldn't be feasible," Mr Meurs said.
This morning, Myer's CEO Mr Brookes clarified that the retailers were not calling for an end to the GST on domestic purchases but merely highlighting the inconsistency of the current tax regime.
The Government expects to receive the results of a Productivity Commission inquiry into the country's retail sector within nine months.
Other retailers to join the Retail Coalition include Angus & Robertson, Borders, Dotti, Portmans and Witchery.
