Government accuses big retailers of “exaggerating” claims that overseas retail sales hurt Christmas trade

Assistant Treasurer Bill Shorten says big retailers including Harvey Norman and Myer have “exaggerated” claims that their Christmas has been hurt because shoppers have turned to overseas retailers that are able to sell goods GST-free.

The defence comes as industry veterans including David Jones, Myer and Harvey Norman have formed a new coalition and launched an advertising campaign today claiming overseas businesses are threatening to steal Australian jobs due to the exemption of GST for online purchases made overseas under $1,000.

But other groups including the Australian Retailers Association and the Council of Small Businesses of Australia have said the larger businesses don’t speak for the entire industry.

The advertisements claim that if the Government does not work to impose GST for online purchases, the industry “will see a reduction in hours and shifts for casual and part-time workers and ultimately cost Australian jobs in retail, manufacturing, logistics and related services”.

The groups, which collectively employs over 76,000 workers, also say that if overseas, online retailers are exempt from paying GST then domestic retailers should be exempt as well.

Gerry Harvey was contacted by SmartCompany this morning but declined to provide any further comment.

While the coalition has welcomed the Productivity Commission’s inquiry into the retail sector, announced last month, it also says this will only delay the problems facing retailers – and the government needs to make a decision now.

However, despite the onslaught of advertisements, Shorten says the retailers’ claims are overblown and that the Government will not be rushed into making a decision based “on a vocal minority”.

“Online retail sales account for about 3% of all retail sales in Australia, and it is estimated that between 20% to half of these sales relate to overseas purchases,” he said in a statement this morning.

“There is no denying that retailers are doing it tough, but other factors like the high Aussie dollar, the ongoing aftershocks of the GFC and the fact that Australians are simply spending less this Christmas are having a much greater impact than the absence of a 10% GST on a small number of overseas imports.”

The statement also praises online retailers, saying “consumers enjoy shopping online because it offers them choice, convenience and often discounts far beyond 10%, because international retailers have embraced the digital economy and have developed sophisticated and consumer friendly business models”.

But not all retailers agree the government needs to make its decision straight away. Australian Retailers Association executive director Russell Zimmerman says a knee-jerk reaction will have negative implications for the industry.

“We are both aiming for the same thing – a level playing field in the retail industry. And we don’t think that a knee jerk reaction from the government to put in a reduction on the threshold will be the best result. We think the important thing is to work with the government.”

“I think you have to take everything into context. It’s tough out there – Colorado Group has said it’s having troubles just last week, and we had one of the toughest leads into Christmas. But we need to get a consensus.”

Zimmerman says the inquiry should consider other issues as well, such as rising retail rents – another issue he believes is creating more pressure on small businesses.

“We’re not trying to take this issue away or hide the fact that retailers are doing it tough, but we don’t think a knee jerk reaction will help anyone.”

The Council of Small Business of Australia chief executive Peter Strong has also said that the larger retailers don’t speak for the entire industry – but also says the government needs to impose a GST on online sales.

“As a result of this anomaly we see the big retailers such as Gerry Harvey and Myers having a good old-fashioned whinge and even deciding to set up stores off-shore to dodge the GST.”

“This is laughable given that these large retailers have helped push many small retailers out of business. The smaller retailers have been aware of this GST issue for many years and have expressed concern to various governments but they have been ignored.”

Strong says the Government needs to ensure every online payment is subject to a 10% tax – although he has previously said that collecting this money would be a problem.

“We live in a high technology world so it will be very easy to collect 10% of all overseas sales from the Credit Card companies and they can pass that cost onto the consumer, the same as all retailers in Australia.”

And although retailers are calling for a drop in the threshold, previous research conducted by SmartCompany has found that most online purchases are well below $1,000 and in most cases do not exceed more than few hundred dollars.