Sunday, 11 November 2012

Should the Govt impose the GST on purchases from Overseas?

GST or NO GST?   

This is the burning question currently.Should the government impose a GST on goods purchased for $1000.00 and under from overseas?
This has created hot debate depending on whether you are on the side of the consumer or on the side of the retailer.What I can tell you is retail, both Australian etail and Bricks and morter (B & M) stores are suffering.
Yes, etail stores are growing with some great success stories, however there are many others closing their doors due to the high level of competition and uneven playing field.B&M stores are suffering the most.This uneven playing field has been caused not just by the 10% GST imposed on goods purchased in Australia, but in large due to huge level of competition made possible by the internet and the global competition for our consumer dollar.
Stores, both etail and retail in previous years only had to compete with stores Australia-wide, now they have to compete world-wide which  brings into effect many other factors, cost of labour,Aussie dollar Vs US dollar,manufacturing costs etc.
Our mining boom has been great for our economy but this has helped drive up the aussie dollar.Whilst the aussie dollar remains high, cost of exports has increased and therefore exports are struggling to survive.However the cost of purchasing goods from overseas has come down, making purchases from overseas more attractive to the average consumer.In a day where each of us struggles to make our dollar stretch as far as we can, understandably we are going to shop where we can get the best price.
Many large overseas companies/stores have already worked out that Australia has one of the strongest economies in the world and so have restructured their websites and stores to cater to the Australian consumer.We are bombarded with flat rate postage advertising/ free postage to Australia.With the high Aussie dollar their prices are very attractive, coupled with minimal or free postage.Unfortunately retailers/etailers here are faced with expensive distribution costs.It can be more expensive to post an item from Sydney to Perth than it is to post an item from the UK to Sydney.Our high distribution costs alone make it a difficult for the retailers to compete.
Retailers/e-tailers are also faced with the higher cost of products.Due to our apparent "remote" location suppliers charge the Aussie supplier/wholesaler a higher price than our US/Asian counterparts.This is not only due to our location but also our population size.We do need to remember places like Asia and the US have a much bigger population and so demand for products are much higher.The price their wholesaler purchase the product for and the price our wholesaler pay is vastly different.
Branded products are even more expensive and many retailers I have noticed are reducing the amount of branded products they are offering.It is simply not viable in our current climate with such intense competition world-wide.Again the price on a product sold to an Australia wholesaler and a overseas wholesaler are vastly different.To counteract this some Australian retailers would purchase directly from the manufacturer overseas, known as parallel importing however this has recently been vetoed by a recent Federal court decision.Please see last blog titled Lonsdale Australia vs Paul's Retail Pty Ltd & Anor (Paul's Warehouse Group).What this does mean that the Australian retailer has no choice but to charge a higher price that what is offered overseas as our purchase costs are much higher.

By imposing GST component on overseas purchases, this will at least keep some of the money here in our economy.Whilst I do not believe it will deter Australian buyers as even with an increased 10% cost, many that I have spoken with have said whilst it is still cheaper to purchase overseas, they would continue to do so.However, this would mean from every purchase made under $1000.00 at least 10% would remain on Australian shores to benefit those living here.The additional revenue could be used to fund roads, housing, eduction etc. (this is obviously an ideal scenario). Currently Australians are sending all our of cash overseas and the only ones benefitting are the overseas business/stores.Each and every dollar you spend purchasing overseas is one less dollar in our Australian economy.This is food for thought.

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