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Gerry Harvey & Solomon Lew digging their graves

The move to force GST on internet purchases of less than $1000 from overseas suppliers has been led by Solomon Lew and Gerry Harvey.  It is motivated by their ‘principles’ –  that goods purchased overseas by Australian residents on the internet should be subject to the same GST impost as locally-supplied goods.  The equity argument is clearcut.  In pushing this argument however consumers are venting their anger on those who advance it – in the main Harvey but also Lew – and presumably also too on the retail chains these highly principled gents are associated with.    Harvey seems to be back-tracking on his normal arrogant attitude that he is some great leader – that he sells fridges means he should lead the nation – I guess his eyes are firmly on Harvey Norman’s profits as he seeks to engineer a strategic withdrawal from a position destested by his customers.

I don’t have much sympathy for these gentlemen. Prices in Australian retailing are too high even allowing for the GST discepancy and for low levels of protection.  People buy goods overseas because margins are much lower there because of higher levels of competition in overseas markets and better service.  One of the worst aspects of retailing in Australia is the way dumb-assed finance graduates and deadhead MBAs have come to dominate the stocking policies of firms.  Miserable or non-existent levels of inventories mean that when you want to buy something it is never in stock but “we can get it in for you”.  Why should I pay a huge margin for someone to make a phone call for me? The issue verges on the ridiculous when the item is a book I seek – I’ll order myself directly from Amazon thank you.

Many years ago I sought a set of state-of-the-art Leica binoculars from Australian stores and the price quoted was well in excess of $3000.  I bought the same in a non-duty free port overseas (in fact Bangkok) for a bit more than $1000. I was astonished and could not account for the discrepancy in terms of GST or import duties – it had to be margins. Moreover, the Australian stores did not have the items in stock but “could get them in for me”? The store in Bangkok had them displayed on their shelves and could deliver with an international warranty on the spot.

Its an instance of the general idea that many markets in Australia are thin and dominated by a few fat and lazy firms.   Purchasing on the internet provides an extra source of competition for these loafers.  Of course, in addition, the transactions costs of arranging GST payments on imported goods would nullify any revenue advantages these charges would provide Treasury while protecting the lazy Australian retailers from competition at the expense of Aussi taxpayers.

Pull your heads in Gerry and Solomon – Australian consumers will not quickly forget your role in this campaign particularly if it should prove successful.

Update: The Age’s Shaun Carney makes the same point about margins that I do.  Why can retailers offer post Xmas discounts of 50% and why do running shoes in Australia cost hundreads of dollars when they can be bought on the internet for v$10?

3 comments to Gerry Harvey & Solomon Lew digging their graves

  • Sam

    Harry,

    Not many people have mentioned that the GST is a value added tax. Some goods are not subject to GST in Australia, but are assumed to be input-taxed – that is the retailer can not deduct the GST on the inputs from their tax bill. Aren’t imports from countries with a VAT similiarly input taxed. Sure the money doesn’t go to the Australia government, but it does affect the prices.

    Just a thought.

  • conrad

    It will be interesting to see how they will deal with the really high service internet retailers when they get here, which presumably will either get created here or spread from the US sooner rather than later.

  • ken n

    I agree, but Harvey is not dumb. He must have an agenda but I’m darned if i know what it is.
    He has a problem with the whole online thing. His stores are franchised and it would be difficult to bypass the franchisees to sell direct.
    He did play with online a while back but dropped it.
    I am sure you declared your binos when you returned, Harry?

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