Myer calls for drop in import threshold but shipping companies fight back

Department store giant Myer has joined a chorus of retailers calling on the Government to reduce the low-import threshold to $100 and impose GST for online sales to create a “level playing field” for online purchases.

The recommendations are contained in a new submission to the Productivity Commission, which has received nearly 90 reports from retailers, industry bodies and individuals. Most of the submissions call for a reduction in the low-import threshold.

“There are many factors contributing to an increase in online purchasing in Australia, including domestic cost structure impediments, a strengthened Australian dollar and increasing access to mobile internet technology as well as broadband rollout,” Myer chief Bernie Brookes wrote in the submission.

But a group of shipping companies – which have enjoyed a steady rise in business as shoppers buy more online – have told the submission that lowering the threshold will have a number of negative consequences.

The Conference of Asia-Pacific Carriers, made up of shipping companies DHL Express, TNT Australia, Federal Express Australia and UPS, has told the Commission the current threshold is manageable for all parties, including shippers and government agencies.

It also argues lowering the threshold would result in a “number of negative and inefficient outcomes”, which would include lower efficiency in the Customs and Border Protection agencies, reduced speed of business, additional compliance costs for small business and disincentives for eCommerce.

“The range of stakeholders that would be disadvantaged by a reduction in the LVT includes the express carrier industry, the freight forwarding sector, transportation and logistics businesses,” the submission states.

“The end users of the supply chain, ie. business and consumers, would also suffer from reduced cashflow and an increase in administration and document recovery costs which cumulatively would discourage trade and commerce.”

These sentiments were echoed by shipping companies at the Government’s online retail forum back in July, which brought together a number of the nation’s biggest eCommerce businesses.

The submission argues that the Government’s own low-import compliance campaign undertaken by Customs found there was “no identified systematic or wholesale importation of low value goods to avoid GST and duty” and that “shipments were not being deliberately broken down into smaller imports to take advantage of this threshold”.

As a result, the group says lowering the threshold will increase compliance costs for businesses, but will not actually produce much more revenue for the endeavour to be tax efficient.

“For a threshold of $400, additional revenue collected might amount to $291 million while imposing resource costs of $334 million,” it argues.

“Partial equilibrium analysis suggests that there are welfare costs from reducing the GST low value threshold from its current level,” it says.

“This mainly reflects the high share of goods destined for businesses, which claim GST credits and the high costs for formal processing of import declarations for express carriers and Customs.”

It is little wonder these companies want to avoid dropping the threshold for tax – many of them are enjoying a rise in shipments due to the increase in overseas-based shopping.

However, Parcel Express chief executive Jason Picknell points out their success is at the expense of the Australian dollar, which can prove to be fickle.

“There has been a trend in the movement of parcels. UPS in particular have seen growth out of the American market, and really it’s due to the Australian dollar, and being able to buy products overseas when the dollar is so strong.”

“The Australian dollar can be fickle, although I think people are naturally looking for a bargain online anyway, and that may just happen to be from overseas.”

Meanwhile, Myer chief Bernie Brookes has detailed in the company’s submission that while the low-value importation threshold is a barrier to online business, there are other factors at play.

Like the retail bodies before it that have submitted recommendations to the review, Myer says its primary concern is the compliance burden associated with inconsistencies between state and territories with regard to trading legislation.

“As a national retailer, legislative inconsistencies impact on operational areas including trading hours and days, planning and development, workers’ compensation and occupational health and safety requirements and the administration of Long Service leave provisions.”

It also complains of not being able to find and retain quality staff.

The department store company included a number of recommendations:

• Harmonisation of trading laws across all states and territories, along with workers’ compensation requirements.
• The investigation of a new commission-based pay system to offset a proportion of current fixed cost systems.
• Removal of parallel importation restrictions.
• Investment in retail industry partnerships.
• Greater guidance for the retail sector regarding the proposed carbon tax and its impacts.
• The establishment of a retail advisory panel, similar to the mining and resource panel.

Brookes details a number of pressures facing the industry, including price deflation, and says work is needed to maintain the “shopping day out” culture in Australia.

It also accounts for the discrepancy between overseas-based prices and local retail prices by blaming wage costs, high rents and infrastructure costs, and even admits that a 10% price difference would not be enough to keep local products competitive.

“A reduction of the low value importation threshold… provides ample scope for online purchases of incremental items rather than the current limit, which encourages a wholesale shift to online at the unfair expense of domestic bricks and mortar retailers.”