Overseas Shopping Habits Unlikely To Change

Almost 80% of Australian consumers oppose reductions to the GST-free threshold on overseas online purchases, but any change will do little to quell their appetite to spend, new research reveals.

According to a study conducted on behalf of MasterCard, increasing tax on purchases from overseas sites is unlikely to have much of an effect on Australian consumers’ shopping habits.

Of the 1,250 Australians surveyed, 79% oppose reductions to the current threshold of $1,000, despite calls from major retailers such as Myer and Harvey Norman for it to be lowered.

GST threshold changes unlikelyAssistant Treasurer David Bradbury has said the federal government acknowledges the current threshold is “very high” by international standards, but has rejected calls for an immediate reduction.

Even if it was lowered, it wouldn’t slow the desire of Australians to “search the world for a bargain”, MasterCard claims.

Of the online shoppers surveyed, 38% said a change to the threshold would have no impact on their behaviour, while 24% said the move would only cause them to buy online less often.

According to David Masters, vice president of strategy and corporate affairs at MasterCard, price isn’t the only motivating factor driving people to shop with overseas online retailers.

While 86% of respondents said price was important, Masters says Australians are “right at the forefront” of the modern retail experience, where online shopping has become the norm.

According to MasterCard, 12.6 million Australian adults have shopped online in the last 12 months, while two out of every three shop online at least once a month.

Australian brick and mortar retailers would love to see a tax on “large” overseas internet sales through a lowering of the $1,000 tax-free threshold. However, given the difficulties of collection, it is not clear that it will help raise much revenue in the short term.

Australian Money in WalletHowever, there is little point in having a tax rule for purchases over the internet if there is no practical way of collecting it. In terms of a taxing point or tax collection point, this is difficult.

Australia could make every online retailer in the world register for Australian GST if they export Down Under. While technically feasible in today’s world of tax cooperation, this is unlikely in the short-term.

More likely in the short-term, the obligation to collect the tax would be imposed on the recipient of the overseas parcel. This would be complicated and is certainly not a model used under the income tax system.

The local retailers in Australia could learn a lot from the US retailers, how they are embracing change, technology, and have connected their business to consumers in as many ways as possible.

Regardless of what happens in the GST threshold discussion – retailers cant hang their hats on its outcome – favorable or otherwise. Retail may be hurting now, it will get better, but it won’t get better waiting around and complaining about uneven playing fields – as you could do that forever.

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