Why now is the time to change the GST rules

It’s been a huge week of change and news in the retail sector.

Myer slashed the number of brands it sells, and moved to a more flexible permanent part-time sales staff structure.  DJs sold iconic property, and there were strident calls for Woolworths to sell Masters and look at selling Big W (one avenue, that I still believe, may be the way that WalMart finally enters our market).

And, almost as an afterthought, there was the debate over introducing GST at a much lower value on imported online purchases. His is something that I believe should now be adopted, even though five years ago I would have said don’t. So what’s changed?

Well five years ago we had a very strong Australian dollar, higher interest rates than the US and Europe and some of the highest retail prices in the world. For anything. Actually for EVERYTHING. Shoes to cars. Peanut butter to wine glasses. And we shouldn’t have had prices that high.

 Not having the GST on purchases under $1000 would not have made any difference whatever to us shoppers going online to purchase identical items from US, where retailers  offered them for 30% to 50% less all day, every day.

What our shopping behaviour did do was made everybody – from the import to wholesale to retail industry in Australia – look honestly at why prices were so high. The results were differing paths to the same end game. And that end game was lower prices on the shelf for Australian shoppers.

The differing paths included bringing in a whole new team to lead Coles. A team that very quickly called out differentials between the lower prices UK supermarkets were paying for the same items.

Guy Russo at Kmart took a different path. A path that went right around the importers and straight to factories around the world. Kmart dropped prices faster than any other retailer in Australia, and by a long way.  

International brand owners like Zara and Uniqlo opened stores with prices that were lower than mainstream Australian fashion prices from day one.

Five years on, we’re pretty much aligned with global pricing. The hard work has been done, price parity is much better and 10% extra “cost” on an item is now more material than previously. So now it’s time for everybody who sells products into Australia to pay the same tax as Australian domiciled retailers and international retailers who operate in Australia.

 GST, like fuel and freight costs and wage rates, are the canvas against which all retailers in any country paint. And if a GST impost causes sales from international online retailers to drop they may even look at lowering their base prices or including freight costs to compensate. And that in turn leads to better overall pricing.  

 Introducing a tax to lower prices? There has to be a role for me somewhere in Treasury. Surely?

Kevin A Moore is a retail expert and the chairman of Crossmark Asia Pacific Holdings and Mirador Retail Technology. He is also the founder of TheRoadToRetail.