Today's final rush to complete pre-Christmas shopping will also complete a highly successful period for retailers. The economic upturn and surging consumer confidence have had their tills ringing merrily. The Retailers Association expects this to be reflected in 4 per cent higher December sales than in the same month last year. It was also expecting a festive bonus in the release of a discussion document that it believes will set the stage for the levying of GST on overseas online purchases worth less than $400. On that, however, it will probably be disappointed.
Inland Revenue and Customs officials have been working on the issue for the past five months. The document, intended to be followed by another in May focused on "solutions" for collecting the tax, was originally intended to be released before Christmas. But that deadline seems destined to come and go, a pointer to the vexed nature of the issue and the Government's realisation that, with the exception of retailers, nobody will applaud having to pay an extra 15 per cent on items bought online. That 2014 is an election year only adds to the unwillingness to proceed at full speed.
The retailers contend that, tax-wise, they are not competing on a level playing field with increasingly popular international online sellers such as Amazon when it comes to small-value items such as books, CDs, and clothing. This, they say, is not only undermining bricks-and-mortar businesses. The galloping popularity of such private purchases means the Government's coffers are missing out on $300 million a year. Additionally, they note that online shopping is an aberration because other importers are charged GST at the border.
There is some validity in all these points. Nevertheless, there are good reasons for the Government to hesitate. Shortly after the working party was announced, the Customs Minister, Maurice Williamson, said it would be virtually impossible to find an effective system to collect the GST on all purchases. That may be unnecessarily defeatist given the electronic tracking available today. There is, however, a clear danger that none of these arrangements will guarantee that the eventual tax take will be worth the money, time and effort spent collecting it. This has been a problem overseas, with the result that a low priority is attached to taxing small online purchases.
The Government is, however, under pressure from more than one quarter. In Australia, the momentum to close the GST loophole is much stronger, a point that will be emphasised by local retailers. But there is good reason for this. Australia exempts purchases of imported goods worth less than A$1000 ($1089). That means the tax dollars forgone are so much bigger.
Indeed, the Government should not be unduly influenced by the retailers. Online shopping is a fact of life, and even the additional cost of GST would be unlikely to check its growth to any large degree. Consumers use it not only on the basis of cost but for choice and convenience. Retailers need to accept that reality and to combat it by being innovative and creative. Obvious responses are their own strong online presences and added benefits, as offered by some bookshops. They should also play to other strengths, not least the greater consumer protection when something goes wrong, a major plus with Christmas presents.
If current trends continue, there may come a time when it may well be worthwhile closing the GST loophole. Too great a tax sum will be being passed up, as is the case now across the Tasman. But that is not yet the situation here. Having enjoyed a pre-Christmas bonanza, retailers should be confronting the online challenge, not relying on a Pyrrhic victory.