Tag Archives: GST

My great prediction

In a few days time, if it passes into law or not, we will pay GST on any goods we order that come from overseas.

Apparently this will be a big boost to our local retail sector. Unfortunately my prediction is that it will not be anywhere near as big a boost as they are hoping for.

For decades we have all had to pay the Australia Tax. This is the massive differences in price to, say, a notebook for sale in the US and the price the exact same notebook sells for here. You can find even worse examples in everyday painkillers (we pay around $8 for 24 ibuprofen tablets and in the US you pay $10-15 for 500 tablets!

Other examples are DVDs, CDs, books, food…. basically anything.

And when the companies that sell these products at vastly different prices are asked why, the excuse they always offer is the distance to Australia and our smaller market.

So either the suppliers are making a fortune because no-one in Australia has the guts to ask the tough questions or our local retailers are terrible at negotiating.

Maybe a bit of both. Personally I am staggered by the number of people here who will pay nearly double for the latest smartphone or Apple product, as they sell for in the US. Go ahead, check it for yourself.

So, my prediction is that on the 1st of July the people of Australia will have finally had enough of governments introducing new taxes seemingly every week. (A sugar tax? What a laugh. Apparently we can’t be relied on to make our own decision on what we should drink, so of course we need a tax to help us out. To paraphrase The Beatles, they’ll be taxing air next).

We will have had enough, finally, and we will revolt. Personally those items I purchased from overseas – because of this thing that is meant to be free, called the internet – I simply will not buy again.

Why not? Because every time I go to do so online there will be a stark reminder in my shopping cart, GST of 10%. I will get angry and log out.

And I will not buy it locally because unfortunately local retailers, big and small, are lacking when it comes to understanding buying on the internet. Ask them what a Google rating is and they will ask what movie are you referring to. Seriously, key into Mr Google the item you want to buy and stipulate Australia. The first items listed will be Ads for overseas sites, followed by some articles or reviews (from overseas of course) followed by something completely unrelated. Unless you include a store name in your search you will not even get close.

So until the local retailers discover Google search, it will make me so angry trying to find the item I want that I’ll end up not wanting it anymore. Shopping online should be easy and fun, and only a dozen or so Aussie retailers get it.

So, our local retailers will see a much smaller increase in online sales than they hoped for. My prediction is that less than 50% of what was spent overseas up until June 30 this year, will be spent locally in the next financial year.

If I see a news article stating how local retail has boomed I will know it is false, and was probably influenced by government press releases. How do I know this? Because every year, about two weeks before Christmas, every news outlet predicts the biggest spending Christmas ever of $X billion dollars. Then in February or March, on page 27, will be a small article saying the figures are in and it was actually a very disappointing Christmas for retailers. It happens every single year, like clockwork.

I am especially a fan of TV newsreaders proclaiming that in the last weekend before Christmas shoppers went crazy and spent $X billion dollars. Hello? How could you know that? Did you ring every shop in the State and ask them for their sales figures? No? Would the shops even know what their figures were for those two days, and get them to you within just 24 hours so you can run your news item? Somehow I doubt it.

Wet your finger and proudly hold it up high. There, now you have as much chance as getting your prediction right as 80% of our so-called economic ‘experts’.

As Steve Jobs said on many occasions, do not listen to anyone who says they are an ‘expert’ or worse, a ‘guru’, because no-one is, it’s impossible.

So buy big and buy now, the clock is ticking. At least this is one tax you can choose not to pay. And just think of all the money you will save!

GST payable on all items purchased overseas – WTF!!

From the 1st of July, courtesy of the Federal Government who has once again bowed to big busines, lobbyists and those who provide large donations (to both political parties) another tax will be forced upon us.

This new tax will apply to all online purchases under $1,000, where the items come from overseas.

This is the result of extensive lobbying from big business (Harvey Norman, Myer, David Jones et al) who claim their declining sales have been caused by these types of purchases.

Basically they are saying it is not fair for an overseas retail business to provide the same goods they sell but at a better price and with better service.

If you believe that, then you are a big business wearing blinkers to stop you from seeing reality. The reality is that in Australia we receive poor customer service and are ripped off by their suppliers pricing models.

Allow me to explain. But first a quote from an Australia Post study published in 2017*;

Online retailers are a blessing for many Australians – especially those living remotely, or in areas with limited access to conventional bricks-and-mortar stores. Increasingly, customers are heading online to find their everyday essentials at better prices, with buyers in remote
regional locations and tourist towns shopping online the most.

So if shopping online to get the best deal is so important to us, why are they going to tax it?

The answer is in the question, as Governments are always looking to increase taxes. Or, in this case, impose a brand new one. It pays for their perks and helps to fill holes in their budget created by overspending on shiny new infrastructure in marginal electorates.

This new tax goes against the findings of the report quoted above and is weak, pathetic and completely unjustified. Do local businesses really believe that an increase of 10-15% on the price we pay for an item overseas is going to somehow force us to buy local instead? Maybe, if they offered free shipping instead of charging $10-25.

I can buy one book a day for a week (or a month!) from the UK and have free shipping on each one. I can also buy almost anything from China with free shipping. And yet Australia Post would charge me around $20 for me to send one book interstate (including packaging).

I would hate to get a quote from Australia Post as to what they would charge me to send just one book back to the UK!

Local businesses need to be better negotiators with Australia Post, or use someone else (Startrack).

And then there is the ‘Australia tax’.

The ‘Australia tax’ is another way of saying suppliers (Apple, Samsung, HP, Sony, LG and many, many more) rip us off because we are “just a small market” so their costs are higher. Since all their products come from the same factory I find this argument hard to swallow. Again, local businesses need to lessons on negotiation.

So overseas companies sell their products to Australian retailers at up to 30% more than their very same goods sell for overseas. Books, DVDs, medicines and computers to name but a few.

On a visit to the US in December of 2015 my family saw bottles of 500 ibuprofen tablets (yes, 500!), possibly the biggest selling painkiller in Australia, on sale for $10 each. Here $10 buys you about 48 tablets, or ten times the price of the same product you can buy in the US! The same whopping price differential can be found on many everyday medications and vitamins.

A pair of Rockport shoes is half the price if ordered from overseas compared to my local shoe store. The exact same product from the same supplier from the same factory.

I think you get the point.

In addition there are some products you cannot buy here at all, so you have to purchase them from overseas. This includes many excellent vitamin supplements and other health care items. Why should we be punished because we have to buy these from overseas?

There are many, many more examples, especially if you do a quick search for technology, clothing and health products. Many of these overseas sites have free shipping (as per the above examples) and arrive within days. This is mainly because they do not use Australian Post, who take longer to deliver everything and charge you three times the amount for the privelidge.

So because Australia Post cannot get its act together (except when paying their CEOs very large bonuses despite losing money, in which case they are extremely efficient) and large businesses cannot negotiate properly they blame overseas purchases for their declining sales.

Actually we buy online simply because we want the best price and the best service, and unfortunately businesses in Australia cannot compete in most cases.

So we will be paying the government a brand new tax of around 15% of the value of the items we now buy online.

Fifteen percent? Yes, because GST will not only apply to the price of the item you purchase online from overseas, but also on any overseas taxes (such as the VAT in the UK, their version of our GST) and shipping. So you will soon be paying up to 15% more for those items you buy online today from Amazon, Book Depository, iHerb, Alibaba and many, many more.

The same Australia Post report quoted above says most of our purchases online are with largely domestic businesses, not overseas ones;

“Despite international access, domestic purchases still make up the majority of online spending in Australia. At the end of 2016, domestic spend represented 79% of the online market, showing a growth rate of 11% compared to 7.3% for international spend.”

So why did businesses here complain so much about it being unfair? Because that is easier than competing or trying to negotiate better pricing from their overseas suppliers.

The report also states that overseas spending accounted for 21% of purchases. The vast majority, 79%, being purchases from Australian online sites, so they can get it right if they want to. The only unknown factor is how many of those overseas online purchases were under $1,000, the target of this new tax. My guess is around 70%, but we will use 50% to be conservative.

Given that Australian households in 2016 spent $21.65 billion (according to Australia Post whom I don not believe as I shall explain shortly) in online purchases, collectively we will be paying an additional $341 million in tax each year.

It gets worse if you believe Roy Morgan Research over Australia Post (I would) as their study states that we spent $37.8 billion online during the 2014-2015 financial year”**. If we use their figures, we will be paying a total of nearly $834 million a year (using the same numbers as above) on this new tax.

No wonder the Government chose to listen to big business over common sense. However doesn’t the Federal Government keep saying they should let market forces decide pricing because competition is a good thing? At least that is what they say about the electricity market.

So not only are we currently paying far more locally for many hundreds, maybe thousands of items because of the Australia tax, we will soon be paying 15% more for those same items.

My suggestion is that local businesses lift their game and then we would gladly buy from them, as many studies show we want to buy Australian. To do this they need to significantly improve their customer service, have far better web pages, make it easier for people to buy online (have you seen the David Jones and Myer websites? Complete rubbish) and improve their Google search score.

Much easier to blame someone else, and it’s free too.

However, within this rant of mine I do concede that some big businesses here are viewed as quite minor in sales by their global suppliers. Therefore they cannot negotiate lower pricing (Samsung, Sony, Apple to name a few). I suggest they make this fact publicly known so we can decide what to buy with all information on the table. A nationwide boycott of certain brands might even get them to lower their prices.

Oh, and also go to war with Australia Post over their rediculous delivery charges.

When an overseas online book retailer in the UK can send me a $12 book with NO delivery fee, and I can buy a product from China that is worth $5 and get it delivered FREE, we are being ripped off by local freight charges.

In summary GET RID OF THIS STUPID TAX! Businesses have to learn to be more competitive, improve their customer service, maximise profits, make sure they can be found by Google and have great websites that look good on a phone. Pull your socks up folks, do some targeted marketing and stop blaming everyone else.

The retail market has always been tough, so learn what works for your business, keep experimenting.

You must keep up with technology and react quickly by constantly making changes to your product or service.

Or we could all just pay hundreds of millions of dollars in a lovely new tax.

* Inside Australian online shopping, Australia Post and Startrack, 2017

** According to Wikipedia there were 9 million households in Australia in 2016

*** The state of Australia’s $37.8b online shopping landscape, Roy Morgan Research, 2nd December 2015