Closing shop - it's all the fault of GST

[DavidS]

Sadly, it seems that a lot of people are refusing to acknowledge that all taxation is a negative, both socially and economically.

You state that as if it is a fact. It is an opinion, not an opinion I share. I will go no further as political comments aren't allowed here.

XPlora, I'm not aware of the customs processing charge, certainly never seen any evidence of this when purchasing items online from overseas. How is this administered?

DS

[AUbicycles]

Sadly, it seems that a lot of people are refusing to acknowledge that all taxation is a negative, both socially and economically.

Yeah - this probably is getting a bit far far from the cycling connection but I guess the basic example is that taxes go into road which cyclists use. Sure more could be spent and tax isn't nice, particularly knowing that you are paying it and multinations can skillfully avoid - BUT I think mankind would probably living in caves without tax because centralised organisation (ie. a government) goes hand-in-hand with tax.


But changing the debate to GST being stated as the reason for closing a bricks and mortar business - I feel that where this is used as an excuse that people are underestimating the value of local sales. Not to sure however the bike industry compares to say... the kayak industry or publishing or even pharmaceutical industry

[Xplora]

DaveS, it's not a statement of opinion. It IS a statement of fact. If you arbitrarily take something away from someone, and then give it to others without the control of the owner, you create a distortion in the economy, and, inevitably, a loss. The person with a lot of money tends to be smart with their cash (otherwise they would lose it quickly, as "a fool and their money are soon parted") and it is within their interest to be philanthropic - the Industrial Age saw the rise of most of our major charities, as wealth reached out to the poor. Arguably, there was spiritual motivation but the fact remains that giving abundence to the poor doesn't make them rich. It gives them money to spend, but no skill in dealing with it. So, we let the wealthy manage their money, invest their money and employ people as best they can, for the benefit of society. This doesn't always work well, letting the wealthy keep all the money, but neither does the reverse - socialism.

A good tax doesn't penalise the poor, but enables them to contribute as they have ability. GST is perfect for that. Make it broad, make it simple, and the biggest consumers - the wealthy - pay more than the least.
Despite all these potential negatives, we recognise that the social benefits of government spending exceed the economic costs. Governments can achieve some things better than wealthy benefactors, because they are emotionless. So, we accept the negatives, because they outweigh the positives. Violent revolution tends to be the result if the negatives don't outweigh the positives.

On GST _ it's clearly an excuse because OUR retailers could not survive even if the GST was applied. This isn't an acceptable reason for letting the frontline of our economy get destroyed. It's a gross inefficiency, and would have unintended consequences. I remember a department store being a place of quality goods; now they are just ritzy two dollar shops. I don't think I could cope in a world where I have to visit boutiques for everything. It's like a return to the 1900s where there were no generalist retailers like Myer.

[DavidS]

DaveS, it's not a statement of opinion. It IS a statement of fact. If you arbitrarily take something away from someone, and then give it to others without the control of the owner, you create a distortion in the economy, and, inevitably, a loss.

Your opinion, not one I agree with.

Taxes may distort a market, but markets are distorted in many ways. Markets are not the economy, nor are they the only way to organise an economy, nor necessarily the preferred way, nor do we have to choose only one way to organise the economy. Also, the economy is not society, it is only one aspect of society. Taxes funded the research which created the internet. Taxes don't always create a loss. Our tax-funded health system is a lot more efficient than the non-tax funded health system in the USA. Taxes are not arbitrary, they are imposed by an elected parliament. GST is regressive, the wealthy may pay more, but the extra impost of a consumption tax is a smaller proportion of your income the richer you are. Taxation is not always a negative, I present this as my opinion and do not claim it as fact.

You may not agree with my opinions as explained above, but don't present your opinions as fact when they are not.

DS

[Xplora]

I am happy to take on board what you have said, Dave, with the caveat that you accept that the most successful societies in history have been based on freedom to work as they chose, spend as they chose, and think as they chose. Every time the leaders have tried to control things differently to our current set up, discontent and failure has been the result. Simple fact is that successful societies require prosperity of a kind. I am thinking of the Greeks BC, Romans AD, the USA, the powerhouse cultures of the West.

Which brings me back to the point. No one can honestly say they think it is within the national interest to increase tax burdens on the locals, while letting them slide for foreigners. The great global economy is a noble idea but no one in Australia will make shoes in sweat shop conditions, or work for 50 bucks a day. Other countries don't force their citizens to buy across the border, forgoing tax collection, watching while their businesses falter and their people become unemployed.
I can accept that there are other ways of doing things, but no other country in history has thrived by taxing their people heavily and letting the opposition off Scott free. You can take a few turns for me at my next race if this seems like a good plan to you.

Totally on topic, I wonder how businesses survive when their best profit items like a cassette are taken away? 5 minutes work, bang bang, take the profit. It seems we assume the bike shops only make money off the big ticket items? I just can't get my brain around how we expect our businesses to compete when they can't exit the GST supply chain, but the competition can. Can you imagine any race where you are able to put a 10kg weight on their back and then you both start running?

[simonn]

Xplora, you are looking at globalisation from a far to small perspective. If someone overseas is able to do something evidently far more efficiently (we know that GST is a load of old cobblers when it comes to competing with OS) then you do not compete in that market. Sucks if you happen to be in that market, but ultimately better for the economy.

Then again, I just don't see how people expect to make a living selling things without any kind of value add. Most of the time in Australian retail there appears to be a value minus and we should be grateful for what we have.

In any case, Australia post/couriers are the biggest problem here. Whenever I look online it is the postage that is the problem. I want a $2 doodad which I can get from China with free postage if I am prepared to wait. $3 in Oz + $7.20 postage. So I get it from China. I still don't get how Wiggle can generally get things to my desk at work quicker than an online shop in Oz and for cheaper.... madness, and GST has nothing to do with it.

[blkmcs]

I am happy to take on board what you have said, Dave, with the caveat that you accept that the most successful societies in history have been based on freedom to work as they chose, spend as they chose, and think as they chose. Every time the leaders have tried to control things differently to our current set up, discontent and failure has been the result. Simple fact is that successful societies require prosperity of a kind. I am thinking of the Greeks BC, Romans AD, the USA, the powerhouse cultures of the West. ...

You are entitled to your opinion but please do not present it as fact.

In my opinion; with the possible exception of some parts of the USA those successful societies were not based on freedom to work but on the extensive use of slavery.

[AUbicycles]

My Cycling World (bike shop) in Ivanhoe NSW has recently started a blog and as a retailer posted this entry:

Why Lowering the GST Import Threshold is a Bad Move

If you believe the recent media reports in Australia, you would think that all retailers are pushing to have the threshold for GST on imported goods lowered. The idea being that local businesses are at a disadvantage because they can’t compete with overseas sellers and that adding a tax to international orders will solve their woes. This is completely wrong. The real reason these outdated businesses are crying foul is that they are desperately trying to protect their outdated business models.

At Mr Cycling World, you won’t see us campaigning the government to raise taxes or to slug consumers with more fees and tariffs. We would prefer to campaign our suppliers for better deals so we can offer the best prices in the world. We would prefer to market our products to our customers, so they can find us and be happy knowing that they are supporting a real Australian business. Campaigning for increased taxes is a slap in the face to all Australians. Consider the facts based on recent surveys:

continues...

[Xplora]

blkmcs, I struggle to believe that Australia doesn't have slaves - it's just that when you outsource it to Asia, it doesn't feel like human misery when you slip into the tshirt. (but only a semi wink, the truth is a hard burden to bear)

simonn, efficiency is a very loaded issue, precisely because of my response to blk.

[DavidS]

I am happy to take on board what you have said, Dave, with the caveat that you accept that the most successful societies in history have been based on freedom to work as they chose, spend as they chose, and think as they chose. Every time the leaders have tried to control things differently to our current set up, discontent and failure has been the result. Simple fact is that successful societies require prosperity of a kind. I am thinking of the Greeks BC, Romans AD, the USA, the powerhouse cultures of the West.

Lot of interpretation would be involved in a discussion about that and would not be appropriate on this forum where politics is not allowed. Worth bearing in mind our current set up is maybe 300 years old.

Which brings me back to the point. No one can honestly say they think it is within the national interest to increase tax burdens on the locals, while letting them slide for foreigners. The great global economy is a noble idea but no one in Australia will make shoes in sweat shop conditions, or work for 50 bucks a day. Other countries don't force their citizens to buy across the border, forgoing tax collection, watching while their businesses falter and their people become unemployed.
I can accept that there are other ways of doing things, but no other country in history has thrived by taxing their people heavily and letting the opposition off Scott free. You can take a few turns for me at my next race if this seems like a good plan to you.

Totally on topic, I wonder how businesses survive when their best profit items like a cassette are taken away? 5 minutes work, bang bang, take the profit. It seems we assume the bike shops only make money off the big ticket items? I just can't get my brain around how we expect our businesses to compete when they can't exit the GST supply chain, but the competition can. Can you imagine any race where you are able to put a 10kg weight on their back and then you both start running?

The GST issue is a thorny one. My main issues are: 1) charging a fee to compensate for levying a tax which makes a loss seems silly to me, 2) putting a GST on small imports of stuff bought online is not going to make the local shop competitive on price, 3) the local shops are very badly served by distributors who take longer to get a part to the shop than I can source the part from a UK based online supplier. I think a lot of the problem is the distributor networks, and bike shops are beholden to this as are a lot of other retail businesses. To be honest I don't see why they are bleating so much about the GST, I can see problems which reduce their competitiveness a lot more. I was looking for a new bike earlier this year and one model I was thinking of was not available in the country and the shop said they couldn't get one because the distributor would not bring any more in as next year's model was due in a few months. With support like this I think the bike shops should get together (form a union??) and demand better from their distributors or ditch them altogether.

In principle I see no reason why a GST should not be charged on a purchase made online, in practice it is not so simple. Reducing the threshold is probably viable although I don't think it will make much difference to online purchasing. I buy bike parts online and at bike shops, I'd prefer to support bike shops and will pay a bit extra, it's when it is a lot extra (often double the price) that I go online. I also buy a lot of records but rarely buy online as prices here tend to be similar, my main online purchases of records is for things I can't find here. If the premium to buy here is not ridiculous (say <20%) I prefer to buy from a shop here as long as the service is ok. I suppose free market thinking would say I should always maximise my utility and purchase for the cheapest price but I don't just look at things from a economic perspective.

DS

[Ross]

The GST issue is a thorny one. My main issues are: 1) charging a fee to compensate for levying a tax which makes a loss seems silly to me, 2) putting a GST on small imports of stuff bought online is not going to make the local shop competitive on price, 3) the local shops are very badly served by distributors who take longer to get a part to the shop than I can source the part from a UK based online supplier. I think a lot of the problem is the distributor networks, and bike shops are beholden to this as are a lot of other retail businesses. To be honest I don't see why they are bleating so much about the GST, I can see problems which reduce their competitiveness a lot more. I was looking for a new bike earlier this year and one model I was thinking of was not available in the country and the shop said they couldn't get one because the distributor would not bring any more in as next year's model was due in a few months. With support like this I think the bike shops should get together (form a union??) and demand better from their distributors or ditch them altogether.

In principle I see no reason why a GST should not be charged on a purchase made online, in practice it is not so simple. Reducing the threshold is probably viable although I don't think it will make much difference to online purchasing. I buy bike parts online and at bike shops, I'd prefer to support bike shops and will pay a bit extra, it's when it is a lot extra (often double the price) that I go online. I also buy a lot of records but rarely buy online as prices here tend to be similar, my main online purchases of records is for things I can't find here. If the premium to buy here is not ridiculous (say <20%) I prefer to buy from a shop here as long as the service is ok. I suppose free market thinking would say I should always maximise my utility and purchase for the cheapest price but I don't just look at things from a economic perspective.

DS

It's not really about making the local shops competitive again, even Gerry Harvey acknowledges that now, it's about raising money for the states govts so they can spend (theoretically...) on schools, hospitals roads etc.

When/if the GST is charged on the low value imports there will be extra charges from the banks or the post office or the couriers or whoever is the GST collector, so the price will be closer (possibly dearer in some circumstances) to local shops. So your $10 item may have 10 cents added which is nothing but there may be a $30 or so admin fee added, so all of a sudden the item costs you over $40. The item is probably less than $30 in the local shop. If the local shop stocks it of course, if it is something a bit unusual you may still need to buy it online and pay the extra $$.

[Xplora]

Realistically it comes down to the brand. Shimano is responsible for their pricing. Marketing theory holds that the brand should be arranging prices to ensure that the local distro doesn't take a bath from grey imports, let alone straight out imports via the wiggle model. They know how cheap they can put a cassette onto the LBS shelf. They know. We have to address the issue from the right angles. I am convinced that we won't get a solution until someone decides to get on with it. Arguably Cell Bikes has the right idea. Be the importer. Their prices are crazy cheap when they want.

We have a difficult market. There are plenty of people who can afford to pay the AU markup. House prices prove it.

I see trouble on the horizon - how the EU cope, when they have 20% VAT? A few US states have sales tax. How do they deal with the same issue?

[il padrone]

When/if the GST is charged on the low value imports there will be extra charges from the banks or the post office or the couriers or whoever is the GST collector, so the price will be closer (possibly dearer in some circumstances) to local shops. So your $10 item may have 10 cents added which is nothing but there may be a $30 or so admin fee added, so all of a sudden the item costs you over $40. The item is probably less than $30 in the local shop. If the local shop stocks it of course, if it is something a bit unusual you may still need to buy it online and pay the extra $$.

Two things.

1. GST will be collected by customs. I don't really see it being practical nor reliable to entrust it to other private organisations.
2. Most people don't buy and ship $10 items. It's not hard to build up an order of $100 or more, even when buying smaller items. Then any 'admin fees' lose their impact

Bring on the GST. It won't stop me buying tyres from Europe that cost $55 each instead of the $110 local price.

[biker jk]

Interesting that the average purchase amount from overseas online retailers is just $38! It was $74 at the start of 2010. Admittedly, this reflects the large and growing share of online purchases of media which are low value. Still, only 19% of online sales were for amounts of $50 or more. So the GST threshold will need to be very low to raise much revenue and its collection costs will be very high in that case.

http://business.nab.com.au/wp-content/u ... t-2013.pdf

[Xplora]

Bikerjk,
If anything that makes the case for lowering the threshold to 100 dollars even better... because the actual admin costs are negligible if most of the transactions are STILL under the threshold. We are trying to make the system practical, not just fair - I simply floated the admin/duty charge as a possibility to action things. If you lower the threshold to 100 bucks, you're only losing 10 bucks. Given that customs duty is 50, it makes the case for closing that gap for the benefit of Aussie Retail. It wouldn't matter if a small loss was made. It becomes impractical for people to run a dozen shipments under 100 bucks that they previously only did once to stay under 1000 bucks, if we take the average as 38 dollars. SHipping costs become a more significant issue, as well as lost packages.

I wouldn't want to ship a dozen packages from DX.com. I've been stung badly by them with 3 packages. Never again.
Edit: I think Wiggle and c r c might be a bit less interested in giving things away if you've bought 80 dollars instead of 580 dollars from the order... if they send the wrong cassette they might just send another if the order is big, whereas they might ask for it back if its only 80 bucks. I think there is more to be gained from lowering the threshold to 100 (for example) than we realise.

[il padrone]

A perspective on the likely success and viabliity of a lowered GST threshold, from Alan Oster, Chief Economist at NAB.

An Ernst & Young report commissioned by the National Retail Association said potential GST revenue from doing away with the threshold was $819 million in 2013-14 and growing to more than $1 billion a year within the forward estimates.

But Mr Oster, speaking on the release of NAB's latest online retail sales index, said those figures were just not attainable.

Retailers and fans are significantly overstating the tax benfits likely

[Xplora]

10 billion in overseas online sales, under 1000 per transaction? hmmmmmmmm

[Ross]

There could be another negative flow-on effect if the low-value GST thing comes in - Post Offices could go bust with greatly reduced amount of imported parcels to handle and deliver.

[santacruzscott]

There could be another negative flow-on effect if the low-value GST thing comes in - Post Offices could go bust with greatly reduced amount of imported parcels to handle and deliver.

Tell me about it........

I work for Post , and as the letters business dies off , the small parcels side of business has moved in to replace that.
If small parcels drop off , it's hard times for Australia Post , and no doubt some of the other courier companies out there as well.

[il padrone]

I thought the incoming parcels were a real problem for Australia Post as they don't get any income from these, just have to deliver them ??

Anyway, it won't be a huge impact. Charging 10% GST won't put mch of a dent in the on-line overesas retail sales. Only problem, That Australia Post might be asked to play a role in, is the holding of parcels prior to payment of GST.

[queequeg]

I'd like to know what the "Customs Processing Fee" actually covers. At $50 it would kill small value items, which is no doubt what the retailers really want. The issue is that at present, Customs does not handle that many items over the $1000 threshold. If that were lowered and they had 58 million packages to check, how long would it take with current staffing levels?

Pre-GST it used to be a $300 limit before duty kicked in (not sure if they slugged sales tax or not). The limit was raised, presumably because $30 was not worth collecting.

If they had a system that could handle the automatic collection, then there should be no need for an inefficient customs processing fee.

If they wanted to keep the fee, I'd just up the size of my orders to reduce the impact. I don't care about GST. I bought my bike online from the USA. It cost me $500 shipping + $430 in GST & Customs fees, but it was still $1,000 cheaper than buying the same bike online here.

[isabella24]

Well I tried bike barn at parramatta today. Just wanted a cheap pair of platform style pedals for my partners bike. Got given a cheap pair of $20 pedals held together with a cable tie, thought ok, these will do, I only wanted a cheap set anyway.

Rode the 10kms home only to find they'd sold me 2 left pedals!!! Didn't have the time to ride the 10km back and then 10km home again so drove down and exchanged them... For the same pedals in actual packaging without scuff marks on them.

Why was I sold a used pair of pedals in the first place, that were both left ones? I had to make 2 trips to parra (40kms) for a set of $20 pedals.

Why do these shops think the GST has anything to do with why I purchase online? I purchase online for the convenience and lack of b*llsh*t!

The only redeeming part was that they exchanged them without problems!
//rant over//

[Warin]

In the distant past I've been charged GST on two parcels.

One through Australia Post - they charged a small "processing fee"

One through a large well known international carrier (don't remember which one) - they charged a somewhat large "customs processing fee"

Both fees were larger than I would have expected. The international carrier said their fee included their labour in acting as an agent for Australian Customs in collecting the fee, something like another $20 on top.

----------------------
Yet to find Jerry saying anything other than the non application of the GST is killing retail sales in Australia. Link?

=================
Purchasing on line = no commute, no parking, no theft or vandalism of parked vehicle (I don't go to town any more by motor vehicle). A sales droid when asked for details on something I was thinking of buying said "You can look that up online." (Dick Smith - after the woolies take over). So customer service can be better online. Problems with on line supply of incorrect goods - return of goods .. wait .. resupply of goods .. added cost of goods return (Wiggle said they would refund this .. still waiting some 14 months later). Swings and roundabouts.

[Ross]

Yet to find Jerry saying anything other than the non application of the GST is killing retail sales in Australia. Link?

http://www.smh.com.au/business/gerry-ha ... 2y83p.html" onclick="window.open(this.href);return false;

[RonK]

One through a large well known international carrier (don't remember which one) - they charged a somewhat large "customs processing fee"

Both fees were larger than I would have expected. The international carrier said their fee included their labour in acting as an agent for Australian Customs in collecting the fee, something like another $20 on top.

Only $20? Lucky you - Customs Agents Fees are usually around $80.