Australia’s Productivity Commission has released its report into the Australian retail industry, and finds that while this country’s 10% goods and service tax should apply to low-value international purchases made over the Internet, collection would be too expensive.
Since the Australian dollar began appreciating in value, Australian retailers have found it hard to compete with international sellers, and have complained that the “low value threshold” (LVT) which allows items costing less than $AU1,000 to be bought and imported without GST collection makes it harder for them to compete.
The commission has agreed that the LVT puts local retailers at a disadvantage, however, it highlights other issues such as the relative inefficiency of the Australian retail sector as being more important.
Cheapskate shoppers can at least breathe easy for now: the government has ruled out changing the tax arrangements for the moment. The commission’s report has said that new tax collection arrangements – for example, using Australia Post as the collection agency – would be required to make it worthwhile to collect GST on low-value imports, and the Australian government isn’t interested.
Instead, the commission identifies Australia-specific issues like zoning regulations, industrial relations laws, regulation of trading hours and retail tenancy rules as factors that make Australia’s bricks-and-mortar retailers inefficient.
Yes, Virginia, there is an ‘Apple tax’
El Reg comment: Overlooked by most commentators so far, the Productivity Commission also identifies geographic differential pricing as penalizing Australian retailers, by encouraging buyers towards parallel imports and away from local outlets.
The “Apple tax” – the practice of setting different rate cards in different countries – isn’t employed only by Apple (which, to be fair, has narrowed the pricing gap in recent months). Everybody’s at it.
El Reg has argued in the past that price discrimination is generally overlooked by media and, whenever it is raised, is defended by a battalion of industry shills, mouth-pieces and sockpuppets. Depressingly, local journalists are frequently more than willing to act as stenographers to special interests rather than challenging international vendors’ shameless gouging. Media outlets will, for example, publicize industry complaints about so-called 'gray marketing' without ever mentioning that parallel importation is protected under Australian competition law (so long as the importer obeys local laws such as paying tax and honoring warranties).
So let’s hear the case from the Productivity Commission itself:
“The Commission is aware of the longstanding practice by which some international suppliers set differential regional prices. This effectively treats consumers in one region as willing, or able, to tolerate significantly higher prices than those in other countries.
“Some international suppliers have attempted to defend such price discrimination as due to the cost of supplying a remote and relatively small market like Australia, which in some cases has its own unique requirements. These arguments in most cases are not persuasive, especially in the case of downloaded music, software and videos, for example, where the costs of delivery to the customer are practically zero and uniform around the world.”
“Not persuasive”: given the gentle nearly-diplomatic bureaucratese used in such reports, the commission has called “bulldust” on defenders of price discrimination. If it’s cheaper for an individual to bypass so-called economies of scale, pay for shipping on a single gadget rather than a container-load, then the price gap between local purchases and internet shopping lies at the feet of vendors that see international markets as an easy road to margin management.
El Reg has argued that geographic price discrimination, along with the granting of “exclusive” distribution rights and retail arrangements designed to keep prices under vendors’ control amount to resale price maintenance – a practice which, although illegal, appears endemic in markets such as IT.
So when the Productivity Commission writes that “Government should ensure that any anti-competitive behaviour which inhibits retailers from purchasing competitively is addressed”, we have to agree. ®