Beware the fury of a consumer spurned.
Since my last post, there’s been a major campaign launched by Australian retailers for the federal government to level the tax playing-field — to impose the nation’s 10 per cent Goods and Services Tax (GST) on offshore online retailers as well. For years, such sales haven’t been subject to either import duties or the GST if the value of an individual transaction is below one thousand dollars. Within Australia, online and in-store sales are all subject to the GST.
The campaign has provoked a volcanic outpouring of righteous anger and resentment. There have been highly critical things said and written about the billionaires identified with the campaign’s launch, and about the retail businesses they own and run. There have been examples cited of much higher local prices for consumer items than overseas ones, of poor local customer service, and of prompt deliveries from offshore online sites.
There have been arguments made that the retailers should face facts, should stop crying poor, and should either shape up to the offshore competition or ship out.
All of this may be fair comment, but it is irrelevant to the principles at stake or the case being made. In other words, most of this adverse reaction is misplaced.
Retailers big and small, as well as countless other companies being adversely affected by the current tax loophole for foreign companies, are well aware that shoppers will keep buying from offshore online sites as long as the Australian dollar remains high — whether a GST is imposed or not.
No one is arguing that consumers should have limited access to offshore sites. Nor is the campaign an attempt to protect local industry, or to prop up ‘inefficient’ business practices or ‘out-of-date’ business models.
It is simply an expression of dismay that an Australian government should keep imposing a tax law that deliberately favours offshore businesses and disadvantages local businesses and employees. It is unconscionable that national tax law should work in this way.
In fact, in all of the consumer fury unleashed in the response to the campaign, I haven’t seen or heard anyone trying to justify the current policy on fundamental grounds. That’s because they can’t: in effect, consumers are currently getting a price-cut that they aren’t entitled to, via a tax-break that’s indefensible.
Businesses have been arguing the case to the government for over a year, well before the Australian dollar rose so strongly, but have been stonewalled. The government doesn’t want to go near it, ostensibly on the grounds of impractibility, but really because it doesn’t want to be responsible for raising the prices that consumers pay.
It’s a supreme irony, of course, that a federal Labor government is refusing to reform a tax — in the national interest — that was introduced by its conservative opponents over its dead body. More specifically, it’s refusing to even unwind the easing of the sales-value threshold that the Howard government introduced because Customs couldn’t be bothered with the work and paperwork involved in scrutinising smaller transactions. The government’s medium-term solution has been to handball the problem to the Productivity Commission. (Readers of this blog will know what I think of this organisation.)
The prime minister’s recent comments on the subject (‘I would be very reluctant to see Australians who are facing cost-of-living pressures not able to access shopping on the internet in the way they access it now.’) are weasel words. The topic under debate has nothing to do with ‘access’. It’s got everything to do with equity — or, rather, the lack of it. Julia Gillard knows the difference — she’s campaigned on this mantra in the educational sphere all her political life. And what’s she doing prejudging the issue, making such comments while she says she’s waiting for the outcome of the PC’s inquiry?
Most consumers want to keep the unfair advantage they’ve been handed by the government, which is understandable. But no one should dress up this reaction as anything other than greed, rancour, or thoughtlessness, and as collateral damage caused by the introduction of the GST itself.
The consumers’ voice, the Australian Consumers’ Association, is behaving disgracefully on the subject. It refuses to address the fundamental principle involved, and pretends that the problem is either non-existent or would go away if retailers simply changed their business practices and became more efficient and consumer-friendly.
It’s typical of this country that interest groups (whether political or commercial) behave adversarily: they argue their own case on narrow grounds, change the terms of the argument, and concede nothing to the opposition.
The real question that is being begged by this furore is why Australian retail prices are so much higher than US or UK prices. The answer is not because big retailers are either hopeless or profit-gouging bastards. Instead, it’s a direct reflection of the size of our economy and the living standards we regard as essential. In every economy, retail prices reflect costs — and our costs, in turn, reflect our lower economies of scale because of our much lower population, our much higher wages and conditions, and our inflated property values.
Those same consumers who are sneering at the retailers should stop for a moment to think about where they get their own purchasing power from in the first place. It’s certainly not by accepting wage rates of $10 an hour, no superannuation, few social services, and a third-world level of income and social inequality. The inevitable consequence of the GST loophole staying in place is that Australian workers and their families will suffer for it — and that the federal government will be denied revenue that it needs and is entitled to.
Globalisation and the internet are imposing remorseless pressures on everybody subject to import competition. Is it too much to ask that an Australian government at least stop favouring foreign competitors, and that Australian consumers understand where the butter for their bread is coming from?
[This post first appeared on Crikey.com on 18 January 2011.]