$1000 import GST exemption - small businesses suffer

Written on 10 January, 2011 by Larry Bloch
Categories CEO BlogTags governmenttax

In ancient times, being the bearer of bad tidings was a risky profession. Great leaders chose their messengers carefully. If the message was that bad, there was no need to use a highly ranked messenger, because everyone assumed that he would be killed upon delivery. A higher ranked messenger was worth using if the message could be spun – and these messengers survived and gained status by excelling at this task.

In launching a campaign to overturn the tax loophole that exempts overseas internet purchases under $1000 from paying GST, the Retail Coalition, lead by Solomon Lew and Gerry Harvey, failed in selecting an appropriate messenger which then in turn did not deliver the true message. If they thought the Australian consumer would rally around a call by Australia’s leading retailers to levy a tax to support their competitiveness, then they really are as out of touch as many commentators have claimed. The outcome is a message delivered poorly, missing the point which has made the messengers sound self serving.

But despite this failing, the underlying issue is serious and deserves careful consideration. It is not about large retailers being under threat but rather the reality that vast masses of Australian Small Businesses exposed to this particular inequity may well suffer far more than the big end of town as their livelihood is at stake.

Small retailers have taken advantage of the Internet. They are servicing the need of Australians to shop online with competitive pricing and superior service levels against their large retailer counter parts. The result is that their margins are slimmer. They are disadvantaged directly by the 10% disparity in price compared to their overseas rivals.

I personally don’t care if Harvey Norman’s or Myer’s profitability is adversely affected but the uneven playing field does affect hundreds of thousands of Small Businesses, and for the families and employees of these, it’s another matter all together. I have argued before that the body politic in Australia fails to adequately consider how policy settings affect Small Business and that the lack of lobbying power of Small Business ensures that Governments of all persuasions serially ignore their needs.

Despite this, Small Businesses stoically soldier on, with little complaint, against what often seem unfair odds. The $1000 GST exemption is exactly such a case. Australian consumers need to understand this exemption in the context of the survival of tens of thousands of small businesses owned and staffed by their friends and families. Whilst we all like a good, cheap deal, we as a nation are fair people. We won’t wear sports shoes delivered cheaply to us on the back of child labor in Asian sweatshops. Similarly, we shouldn’t be so quick to save a buck when it comes unfairly at the cost of a battling small Australian retailer who is immediately 10% less competitive due to a tax loophole delivered to non-Australian retailers.

This is an important issue, but unfortunately the message was crafted badly and atrociously delivered, and consumers were rightly skeptical. But I urge you to review the impact of the facts. This is not about the profits of large retailers, but about the basic fairness of our tax policies towards decent, everyday Australians who are trying to have a fair go without asking for anything from anyone. The Australian Government refusing to take timely action on their behalf is yet another indictment of a Government that fails to support the millions of Australians who are dependent on Small Businesses for their future – as owners, spouses, family or staff in the over 1 million small businesses in Australia.

So I support the campaign by the Retail Coalition to overturn this unfair and inequitable tax exemption. Small Australian retailers are already doing their best to compete with large Australian retailers and they should simply be allowed to compete on a level playing field with overseas counterparts as well.

If the Australian consumer has to pay a consumption tax on foreign imports, then we should all see that as the fair consequence of being subject to Australian tax law – which ultimately pays for all the Government services we enjoy. That is only fair, and as Australians we have long known and accepted that there is a price to bear by playing fair.