Shoppers won’t stop buying online if GST threshold drops, MasterCard research reveals

The debate about taxes for online shopping has been reinvigorated, following new research from MasterCard which reveals the vast majority of Australians won’t change their spending patterns if the federal government drops the $1,000 GST-free threshold.

The retail industry has disputed the finding, with the Australian Retailers Association saying while online shopping habits aren’t likely to change the sector still deserves to operate on an equal playing field.

Finn Haensel, co-founder of online fashion retailer The Iconic, told SmartCompany this morning the company’s own analysis suggests dropping the threshold would have a significant impact.

“We had a team from CBA here and they did a lot of calculation around what it would mean if the low value threshold would go from $1,000 to $100 – they calculated it would be significant.”

“It would shift a lot of money from overseas back into the country.”

MasterCard surveyed 1,250 respondents who had bought online in the past year. The study found 18% would be “more inclined” to shop locally if the GST threshold was lowered. It also found 38% said a change in the threshold would have no effect on their behaviour, while 24% said any change “would only cause them to buy less often”; 15% said they didn’t know.

However, the study also found shoppers didn’t really have a preference for buying overseas. Only 9% said they preferred overseas stores for make-up and clothing accessories, and about 57% said they were not concerned whether the company was based overseas.

When it comes to shopping online, a massive 86% of respondents said price was the major determining factor when deciding to buy overseas. But MasterCard vice president of strategy David Masters told SmartCompany there was certainly a trend towards buying locally – 56% of respondents said they want to buy locally.

“I think what we see here is that it’s not just about the GST,” he says.

“Obviously the lead topic here is the GST is important, but it’s not going to resolve anything quickly. There are 1,000 reasons why people shop online, and it’s just inevitable.”

A key question asked when respondents would stop buying from overseas. The survey found 15% would stop when the overseas price is 10% less than the Australian price, while 39% said when the overseas price was the same as the Australian price; 19% said they wouldn’t change from buying from online overseas retailers despite the price.

Australian Retailers Association executive director Russell Zimmerman told SmartCompany the survey doesn’t change the fact retailers still need to operate on a level playing field.

“We’ve said that online shopping is here to stay, and we’ve said that for a long time. But we’re still going to ask the government to review the threshold, which they are doing now.”

The government recently said it has no plans to act on the threshold immediately.