Australian retailers leaking cash to GST-free sites: Report

Three quarters of Australian SME retailers are losing at least $50,000 a year to foreign websites that offer tax-free online shopping, according to the National Retailers Association.

In its submission to the Productivity Commission, which is conducting an inquiry into the state of Australian retail, the NRA says tax-free foreign websites are stealing Australian retailers’ sales and profits.

According to the NRA, 12% of local retailers have lost more than half their turnover to foreign websites.

The claims are based on a survey of 156 SME retailers, which found 19% have lost between 30% and 50% of their sales, while 44% have lost 10% to 30% of sales.

Of the 76 retailers who estimated their losses in dollars, 75% claim they have lost more than $50,000 a year, while 54% say they have lost more than $100,000.

The NRA predicts 2,000 jobs will be lost based on the results, with some retailers already dismissing staff.

NRA executive director Gary Black estimates Australians are spending between $5 billion and $10 billion a year on tax-free imports purchased online.

“Both our Australian retailers and the foreign retailers are selling the same products to the same consumers. There is direct competition between them but not on a level playing field,” Black said in his submission.

Black said foreign retailers have been “gifted” with a tax break of 10% GST, and customs duty ranging from 5% to 10%.

The revelation comes as the Productivity Commission reveals online shopping is costing the Federal Government $1.3 million a day due to the GST $1,000 threshold.

According to the commission’s estimates, lost revenue from the GST is forecast to grow 10% each year to hit $610 million by 2013-14.

The commission says it would be “preferable” to give all retailers the same tax treatment in a bid to even the score.

“The number of parcels entering Australia under the low value importation threshold has risen in recent years and is likely to increase further,” the commission said in a paper released last week.

“It would be preferable to apply the same rates of taxes to all imports so that competing businesses were treated equally.”

The commission paper reveals that Australia’s tax-free threshold is 50 times higher than Canada’s, eight times higher than Japan’s, and three times higher than in New Zealand or Singapore.

The commission refers to claims by some retailers that smaller players are abusing the tax-free threshold by buying goods valued at less than $1,000 from overseas and on-selling them to customers without paying GST or customs duties.

“There is nothing illegal about this practice, but some have alleged that the current regulations in this regard put larger local retailers at a competitive disadvantage,” the report says.

Fair Imports Alliance spokesperson Brad Kitschke says the industry is “still waiting for answers” with regard to lowering the GST threshold.

“We are told a lower rate of the threshold is not ‘administratively or economically feasible’ but we have seen no modeling, not data, no analysis, no reports,” Kitschke says.

“On what basis is this claim made if the data doesn’t exist? This information is crucial to industry being able to properly contribute to the PC inquiry process.”

“We asked questions like, how many packages come in under the threshold in a year, what is their value, what has been the increase?”

“Customs say they either don’t have the data, can’t share it with industry or it’s for ‘government only’. If they don’t have some of this data, what have they been basing their decisions on for the last five years?”