The revelations have been put forward in a stream of submissions to the Productivity Commission’s current inquiry into the Australian retail industry. Myer, Target and commercial property giant Westfield have joined major industry associations and retailers in lobbying the federal government for fairer trading conditions in the wake of an online shopping boom.
Central to all submissions from the sector was the current tax threshold on imports, which allows consumers to purchase products online valued under $1000 GST-free. Myer chief executive officer Bernie Brookes said there were many factors contributing to the growth of online shopping, including the strengthened Australian dollar, increased access to mobile internet technology, a broadband rollout and domestic cost pressures.
“We propose reducing the low value import threshold from the current level of $1000 to $100, a value still high when compared to other countries including the United Kingdom, United States, Canada and the European Union,” he argued.
“In Australia we pay higher fixed wages, penalties and conditions than in China, India and the UK. We pay higher rents than all the other major countries in the world and many of our infrastructure costs and taxes are significantly higher. As a result, our cost of doing business is higher and it is harder for Myer and other Australian retailers to compete on a world scale.”
Brookes pushed for the deregulation of shop trading hours across the country, with “inconsistent and inflexible” requirements in states such as Western Australia, Queensland and South Australia also posing problems for major retailers. Compounding this were recent changes under the ‘modern awards’, which will see increased penalty rates for late night and weekend work introduced from this month onwards.
“The labour market in Australia is a highly regulated environment...the impact to Myer from a cost perspective will be an additional $10 to $15 million per year to operational costs over the next three years,” Brookes claimed.
“This additional expense is on top of any proposed wage adjustment, thereby having the potential to ‘double’ labour costs within the organisation.”
Westfield backed all three claims in its own submission to the federal government inquiry.
“Australian retailers are disadvantaged in three key areas of GST treatment, restrictive labour laws and restrictive trading hours. Each of these three factors is significant in its own right, but in combination they serve to prevent the retail sector from competing on an even footing with online businesses. Many overseas online retailers see Australia as one of their top five markets for expansion.”
While some commentators claim online shopping proves Australians are paying too much for retail goods, the property giant argued it was not just GST and import tariffs which affected local price points.
“Australian retailers pay higher prices for goods when compared to overseas retailers,” Westfield’s submission stated. “This is a result of the smaller scale of Australian retailers in negotiating prices with manufacturers; the cost of manufacturing products specifically for the Australian market; higher logistics costs [and] the presence of a wholesale layer between retailers and manufacturers.”
Westfield counteracted Myer’s proposal of a $100 threshold for GST on imports, stating $20 would be “appropriate”. As the Productivity Commission outlined in its issues paper, the United Kingdom and Europe currently operate VAT thresholds of around $29, while Canada adopts a similar scheme which imposes taxes on foreign purchases over C$20.
Westfield supported Myer’s push for fairer labour laws however, claiming the minimum wage for workers in Australia is one of the highest in the world and at 110 per cent higher than the United States.
“Retailers that wish to trade beyond 6pm in Australia find that the hourly rate paid to retail staff is nearly three times higher than the United States. This is problematic as a proportion of retail sales lost to online retailers would be because of the lack of late night trading options.... Labour costs account for between 14 per cent and 17 per cent of sales for Myer and David Jones, whilst they only account for 10 per cent of Marks & Spencer’s sales.”
While Target Australia’s submission did not lobby for structural changes to the local fashion industry, chief financial officer John Box pushed for a solution which addressed taxation imbalances between offshore and onshore retailers without increasing tax payable by Australian consumers.
“Target believes that Australian retail consumers should not be exposed to greater levels of taxation than they are currently,” Box said of the GST threshold debate. Therefore, importantly, Target believes that any changes arising from the retail inquiry should not result in an increased tax burden being borne by Australian retail consumers.”
Assia Benmedjdoub