GST plan a small victory for retailers amid gloomy forecast

Online customers of overseas retailers would have to pay GST under preliminary options handed to the Federal Government today, while new research suggests Australian retailers’ woes are far from over.

The news comes amid growing calls from bricks-and-mortar retailers, who complain they have to compete with overseas suppliers that don’t have to pay the same taxes on sales.

Last August, the Productivity Commission said the GST-free threshold value for online goods bought from overseas should be lowered from the current $1,000.

However, the commission questioned whether the move would be cost-effective as the cost of compliance could be greater than the amount of tax raised.

But an interim report released today said the option most likely to be successful was if “offshore suppliers have liabilities under the existing law of which they are unaware”.

This would involve simple GST registration, lodgement and compliances processes with “certainty and clarity” in the system.

It would involve “the identification of, and communication with… major suppliers to Australian customers to ensure their voluntary compliance with an increased scope of the Australian GST”.

Under the plan, consumers would be taxed as if the goods had been purchased from an Australian shop.

“Information provided by debit and credit card issuers or intermediaries would be an extremely convincing voluntary compliance tool,” the report said.

The inquiry panel has made no firm recommendation to the government, and will not issue a final report until later in the year.

However, it seems retailers still have plenty to be concerned about, with a report showing Australia’s $12 billion fashion retail industry will remain in a rut for at least the next five years.

The IBISWorld report shows the industry will average just 1.2% annualised growth for the next five years as shoppers bypass high-end purchases for low to mid-range clothing.

According to IBISWorld, Australia’s fashion industry is forecast to experience growth of 0.5% this year, bringing total revenue to $12.1 billion.

“Discounted fashion lines are certainly outperforming luxury lines and this trend is not expected to slow down any time soon,” IBISWorld general manager Karen Dobie says.

Last week, analysis from the Commonwealth Bank showed middle-market fashion retail had the slowest growth over 2011, at 8% below average, with 2012 also expected to be lacklustre.

The gloomy forecast comes at a time when retail in general is suffering from soft consumer sentiment and increasing competition from overseas online sites.

And it is not just online where local fashion retailers are facing a flood of new competitors.

Global brands such as Topshop, Zara, H&M, Uniqlo and Sephora are looking to the Australian market as a shelter from the financial crisis in their own home markets.

While many fashion retailers are suffering, some have thrived.

High-end handbag and accessories business Oroton has dodged much of the trouble in the sector to post double-digit revenue growth and a 4% profit increase for the first half.

According to Dobie, retail spending will improve as consumers clear debt and begin to direct savings towards the shops again.