The sector is locking arms to tackle taxes on global imports. Assia Benmedjdoub investigates.
Dear Colette,
Firstly I thank you for the taking the time to read this letter. We are approaching the Treasurer of the Federal Government to STOP the $1000 threshold on imports into Australia which currently are allowed to be received free of duties and taxes (incl. GST). I am writing to you in order to try and gain the support of yourself and David Jones. While I have been writing to the government for some two years about this, the effect is now felt much more strongly by many retailers because of the AUD$ and the encouragement from media to go online and purchase, especially from the USA.
Prior to stepping down as group general manager for fashion and cosmetics at David Jones, Colette Garnsey received this letter from David Mendels.
She was among hundreds of retail clients contacted by the frustrated managing director of International Fashion Group, a company which imports upmarket denim labels such as True Religion and Paige Premium Denim. How were local suppliers and retailers expected to compete on price, he wrote, when consumers could hop online and order garments from offshore etailers, tax and duty free?
Currently, any imports under the value of $1000 can be brought into the country without incurring additional costs at the border. This means, for instance, that a pair of True Religion jeans can be ordered from revolveclothing.com at US$206 instead of up to A$339.95 locally.
“The media continue to claim the price we pay in our retailers is abnormally high, when actually it is due to an unfair advantage US online stores have compared with domestic retailers, from an unjust law our government has in place,” Mendels argued.
“Australia is the only country that allows any orders to be brought into the country tax and duty free.”
The issue has been brought before the Australian Retailers Association, which has vowed to investigate import taxes in other countries before broaching the topic with policy makers. Meanwhile, Edwards Imports, which has both a wholesale and retail business, has thrown its support behind Mendels’ bid for a 30 per cent tax on overseas orders. Director Janine Edwards said she just wanted a fair go for local businesses.
“I am speaking on behalf of the thousands of retailers who are complying with Australian law by paying duty and GST on all goods they sell,” she said. “Online stores are here to stay, however retailers are only asking our government for an equal playing field. In discussion this morning I have been told to buy my $220 face cream, which I purchase from my beauty salon, online for $99. This price is duty, GST and freight free. This is not a fair situation. Retailers are missing sales due to this – once sales drop off so do businesses.”
Edwards imports over 20 international brands, including J Brand, American Vintage, No.l.ita and Ra-Re. She also operates boutiques Janine Edward, Come as You Are and Fifiluxe Online.
“The public at the moment think it is great, because of the prices, but when they lose their job due to retailers not being able to compete with this duty tax-free loophole, they might feel differently,” she said.
However, Council of Textiles and Fashion Industries of Australia president Jo Kellock isn’t certain taxes are the right solution.
“Whilst some answers might appear to be with the GST and/or customs, current collectors already appear to have their hands full processing nearly a billion TCF units per annum, which may lead to further bottlenecks,” she said. “Other than UK VAT and EU taxes, there are some measures taken by other countries which may be worth investigating where the post office collects a duty on parcels, for example in Canada and South Africa.
“I am not sure how courier companies like DHL, which already collect GST on $1000+, would feel about the additional work collecting multiple small transactions. One would have to weigh up the cost of collection against the income received. Is the proposal being put forward to lower the threshold to zero? A lot of online sales are under $50.”
Kellock was however firm in her support for greater scrutiny at the border.
“As a side issue, online sales create other difficulties for the sector in monitoring product safety standards. Who is held accountable and who will accept the risk if a child is badly burned in a fabric that is not permitted on product normally sold in Australia? Who and how will this be monitored? Perhaps Australian retailers could use this to their competitive advantage. With this sort of online pressure they will certainly be forced to look at innovative ways to attract customers and improve product and services.”
Gazal chief operating officer Craig Barnett believed local services were on par with the international market – Gazal counts Calvin Klein Undewear, Lovable, Crystelle and Trent Nathan among its portfolio – and the issue rests squarely with fairer import rights.
“Our raw manufacturing costs are of course much the same as others, so the variables come down to exchange rates, duties and the hefty costs of running a full-service retail business. Without the heavy Australian operating expenses, of course a direct overseas supplier can undercut an Australian retailer. Don’t Australians want those full-service retail operations maintained for their shopping pleasure?”