Retailers divided on proposed parcel tax

Heather McIlvaine

27th Mar 2018

More retailers have weighed in on a government proposal to levy a $5 tax on overseas parcels entering Australia.

Following last week’s report from Fairfax Media that the federal government is considering taxing incoming parcels worth less than $1,000 to offset the rising cost of security screenings, Ebay Australia was quick to denounce the plan.

“This will hit consumers hard and we’re worried it will ultimately harm Australian small businesses,” a spokesperson for the online marketplace giant told Internet Retailing.

Over the weekend, however, some of Australia’s leading e-commerce players debated the potential implications of the tax on LinkedIn, revealing they are not all in agreement.

Coming down on the side of Ebay, Paul Greenberg, founder of the National Online Retail Association, voiced his concern that other governments could retaliate by levying their own tariffs against Australian imports, hurting local retailers that sell into foreign markets.

“We don’t want other foreign agencies getting in the way with a counter tit-for-tat,” Greenberg wrote on Saturday.

He added that Australian consumers are looking to domestic retailers to be in their corner.

But Booktopia CEO Tony Nash said the tariff may have a surprising upside, if it is implemented.

“I’m not for or against the tariff,” he told Internet Retailing.

“All I’m saying is if it’s put in place, don’t think of it as just another tax on the Australian consumer. What it means is that more people will be employed locally and it will be good for the Australian economy in general.”

Nash believes some retailers have been successful in the Australian market without needing to be on-the-ground because cheaper goods and lower salaries in markets like the US and China give them a price advantage Down Under. Customers have typically been willing to put up with longer delivery times and even overseas shipping costs, since they are getting a better deal.

But if the parcel tax proposal goes through, the maths may no longer stack up. Nash believes some of these retailers would choose to set up local operations, thereby stimulating the domestic economy. He added that it would be better for consumers too, since they would get faster delivery.

The big unanswered question is whether a parcel tax on low-value goods will dissuade Australian consumers from buying from overseas retailers.

The government’s decision last year to extend GST to low-value imports is already going to increase the cost of these items by 10 per cent, starting 1 July. A parcel tax would strike a second blow on consumers’ wallets, but that still may not be enough to put people off online shopping.

“Clearly the consumer will be worse off, but I’m not sure if it’s going to deter them from purchasing goods overseas, given the variety and economies of scale that overseas retailers have access to, which allows them to provide the same product at a far better price,” Andrew Barrah, partner and director of professional services firm Grant Thornton, told Internet Retailing.

Indeed, as Twitter user John Mc wrote on Saturday, “A lot of electronic parts I buy are cheap ($1 – $3) but there is fat chance of finding them in Australia.”

Digital retail consultant Laura Doonin said retailers need to see the parcel tax proposal as a wake-up call to improve their offering.

“I think we focus too much on trying to block multinationals or customers from buying overseas, when we should be focusing on how to improve the selection from Australian businesses and building the profile of Australian businesses in other markets like the US,” she said.