GST on Internet Purchases…

I’ve been thinking about this one a bit recently… My father is a small business owner, running a bike shop for the past 5 years in Ipswich. Over recent years, there has been a significant decline in his business due to customers purchasing items overseas, rather than from his shop..

He was finding that people would come into the shop, try out a bike, or a jersey, or shoes, get the right size, then disappear. A few weeks later they’d be riding around or wearing those items, and how did they get them? Not from another shop… Nope, from the UK! For some reason, these British companies can purchase stock cheaper than the Australian wholesalers, and then on sell the items to customers around the world (with no GST component)..

Now there’s a few different arguments in this case.. The likes of Gerry Harvey and others, have come under fire for pushing the case for the Internet GST threshold to be reduced from $1000, to $100, because the importers are killing Australian businesses.. It’s a valid point..

On the other side, you have groups pushing the fact that the current system is best for consumers, and that if Australian businesses want to compete, they need to move into the online space.. They also claim that the 10% GST doesn’t account for the significant savings consumers can make online, which raises the question as to why are Australian wholesalers paying so much more for stock? Is it purely due to the quantity, and that these overseas firms have much greater purchasing power?

I have trolled the net and the only political party I can find supporting the move are interestingly enough, The Greens – http://news.ninemsn.com.au/national/8191827/greens-back-retailers-internet-gst-bid – I’m not sure if this is just because the major parties haven’t made up their mind or they are just against it..

I understand that consumers want competition so they can pay the least amount for a product, but I am seriously concerned about where this is heading for Australian companies, particularly small business.. Admittedly, there is an emotional involvement for me in this topic and thus a bias, due to my father’s shop, but if we continue to purchase more and more products from overseas, sending our money out of the country, Australian businesses are the ones that are going to suffer, and eventually we will end up doing more harm than good.

Although I don’t usually agree with the Australian Federal MP, Bob Katter, I really see his perspective on issues like this and that of Woolworths/Coles.. Sure it’s great to have cheap prices in the short-term, but what about when all the Australian businesses go broke and there is no competition?? Can we really expect prices to stay low? I doubt it..

There are a few questions to be answered, and first and foremost that is why are Australian wholesalers being charged such higher prices.. Secondly, though, what would the cost of lowering the threshold be and in turn, a cost-benefit analysis..

I fear the same thing that has happened to manufacturing in Australia, will happen for many small businesses, due to our ‘global economy,’ and before I hear any comments about the Carbon Tax, these industries were screwed over a long time before that policy came to fruition, and Australians have the likes of Keating and Howard to thank for that.. Deregulation may have seemed like the right thing to do at the time, whilst blindly following the USA, but look where we are now??

Bit of a story here – http://www.smh.com.au/business/online-shopping-threatens-88k-jobs-retail-sector-claims-20110603-1fjys.html?from=smh_sb

Love to hear your thoughts :)

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