eBay warns consumers may be hit with extra charges if GST-free import threshold lowered

Online auction and retail giant eBay has delivered a response to the Productivity Commission’s draft report into the retail industry, saying it supports the commission’s approach so far but warns lowering the GST-free import threshold could mean higher costs for consumers.

The submission comes as the Productivity Commission held a hearing in Melbourne yesterday for retailers and industry bodies to come and voice their concerns over the report, with a number of groups taking part in a sometimes heated exchange of ideas.

eBay Australia managing director Deborah Sharkey has warned the Commission that dropping the GST-free import threshold could result in raising the “effective” tax rate, warning consumers could be hit with charges by as much as 40%.

The Commission wrote in its draft report that while earning revenue from lowering the threshold is difficult due to inefficiencies in identifying packages that would be worth over a certain amount of money, it should still be reduced.

However, Sharkey says this could hurt consumers, citing a number of different costs including 5% customs duty, a customs cost recovery charge of $48.85, an agent’s processing fee, extra GST and costs of delay in delivery, estimated at an “effective” tax of 0.8% per day.

The submission states that if the low-value threshold was lowered to $500, and a customer imported a $500 laptop, “they would incur an additional $211.75 (GST plus ancillary costs), an effective tax rate of over 40% with shipping costs taken into account”.

“eBay suggests that before recommending any changes to the LVT, the Commission should consider the full costs to consumers, and not just administrative of government transaction costs.”

Sharkey argues that when identifying the impact on consumers, the issue of creating tax equality is less important than actual “effective tax neutrality”, which “would incorporate the totality of additional costs that a consumer would bear if the threshold is reduced”.

The company praised the Commission for referring issues of restrictive distribution practices to the Australian Competition and Consumer Commission, once again citing research that shows online sellers have been pressured by manufacturers or suppliers from selling their goods online.

“eBay is also aware of situations where local distributors and sellers have had pressure applied by prominent Australian retailers to cease selling products on online sites such as eBay.com.au, in competition to the retailer’s own channels.”

It also welcomed the Commission investigating the current state of postage in Australia, saying that “postage inefficiencies should not impose additional barriers to trade or operate to protect the domestic industry from import competition”.

The PC draft report identified a number of inefficiencies within customs and Australia Post, and stated these should be amended regardless of any of its recommendations.

eBay said consumers want reform, and that “data suggests the global shift in consumer expectations towards tracked, easy and affordable shipping is already happening in Australia”, but warned demand on postal services will rise as the NBN enhances online retail and “Australia’s postal infrastructure will need investment to respond effectively”.

The postal industry has already warned that it is becoming unable to cope with the number of parcels being sent through the system due to the rise in online retailing.

eBay says these three separate issues should be investigated before any final report or recommendations are released.

“eBay is hopeful that this inquiry will reach sound conclusions that enable Australian retailing to increase its competitiveness and modernise, including through a flourishing online retail sector with multi-channelling benefiting consumers and businesses.”