On April 21st, our Research Associate and MyChoice Australia Director, Satyajeet Marar appeared before the Senate Committee on Economics Legislation in Melbourne alongside Professor Sinclair Davidson (RMIT) and Dr. Chris Berg to challenge the government’s move to tax low-value online imports.
The anti-international shopping, anti-consumer bill is not only set to make your online purchases a lot more expensive, but proposes to have online marketplaces and retailers acting as tax collection agents for the Australian government – with several online marketplaces and retailers noting that this model may force them to stop selling to Australians.
Moreover, Satyajeet noted that “…the idea of punishing these online marketplaces which connect the buyer and the seller, and do not often deal with the goods or deal with the money, is unjust but also absurd… you are not making them bear the cost.. that cost [will be passed] onto the consumer, who not only pays for the GST but also plays for whatever the compliance is.. you are not only putting a gun to consumers' heads, you are making them pay for the bullets as well.”
Professor Davidson, Dr. Berg and Satyajeet also recognised that the bill could incite a trade war with our international partners, with Satyajeet mentioning that “[American President] Trump has made it clear that he hates the idea of trade arrangements which are really good for one side but where there is no reciprocity… economists agree that when there is a tariff war between two countries the bigger country almost always comes out on top. Either both countries end with a net loss or the bigger country has a significant gain relative to us.”
That the proposal doesn’t come with a regulatory impact statement further attests its unpredictable and potentially dire consequences for Australia’s economy and international trade arrangements.
But that isn’t the only reason why this is a bad tax. Professor Davidson elaborated that “[This] is a social engineering tax. It is designed to change behaviour, which is normally always a bad sign… it is going to raise a miniscule sum of money. The compliance costs, not just the salary costs, of this are actually going to be quite large.”
The government’s claim that the tax is about creating a ‘level playing field’ for local businesses is also flawed. As Satyajeet pointed out – “The massive price difference between what you can buy here and what you can buy online overseas—only three or four per cent of that is because of the GST being applied. Most of it is because it is simply really hard for people to do business in this country. There is an insane amount of red tape. We have restrictions on zoning laws and it is hard to get a business approved. At a time when countries around the world are moving in the opposite direction by liberalising trade and lowering the price of consumer goods from overseas, we are now going in the opposite direction.”
The measure is set to fuel existing resentment against the government. “At a time when housing affordability and affordability in general is one of the biggest concerns for people, especially young people who are struggling to make ends meet, our 2013 survey found out that not only is the cost of living the biggest concern for people today but 52 per cent of people surveyed blame the government at every level for it.. the government now wants to effectively hit consumers with a substantial price hike on what they order online.”
The full transcript of the hearing can be viewed here.