Phil's romantic notions on windsurfing and the GST

If you buy something from overseas (under $1,000), you/they don't pay any Australian taxes or duty, there's not even any local paperwork.

When an Australian company sells overseas he can take off the gst, I would assume the Germans can as well.

The mark up calc is just an example, all sorts of different stores have different mark up, so it's not wrong it's just an example, what I was doing was comparing if the mark up was the same between both, there's no other way to make a comparison. With no mark up at all it comes to $110 and $186.

The only thing that can temper the greed is competition, so if I was a German Diesel store I would sell into Oz at $450, similar to what itunes does.

Friend last week bought a demo 2012 Nissan 370 ZX for $80K,a 5k reduction on new price.

By the way,the car for me anyway was shockingly unpleasant to drive.

I googled the price in the U.S. and from the Nissan website the base model is only 32k!

Some interesting points of view here, I think the truth lies somewhere down the middle of both extremes. As an ex accountant I got to see whats really going on behind the scenes in many businesses, retail, wholesale, service orientated, you name it. Retailers have been hit very,very hard lately as you can see by the number going out of business... Darrel Lea, Allens music, Borders etc etc. Profitable retailers are becoming a dime a dozen. "Change business models' is the catch cry but this is not always easy or in some circumstance even possible, many are doing this and still failing.

Australian business are run under a different set of rules from thier foriegn counterparts. The costs incured by aussie retailers for example are far higher than their U.S. counterparts. For example the wage in a US surf store is around $8/hour, in Aus its $21/hour not to mention Super, workers comp, compliance to workplace safety etc. Conditions that we take for granted here but dont exist in most other countries. Rents in australia are mostly 2-3 times those in the states let alone Asia.
I had a retailing client that was involved in fashion that had 4 stores and 35 employees. Everything was going well pre GFC, post GFC sales dropped steadily and were around 30-40% down after a couple of years. They made the strategic decision to close 3 stores, sack 30 staff and combine a bricks and mortar presence with an online presence. Stock was sourced direct from foriegn exporters (thereby cutting out the local importer) and now sales are at the pre GFC levels without all the massive expense of 3 stores- they are doing much better now than pre GFC. The losers? the 30 employees, the landlords, the distributors that supplied them etc etc.

It seems that a lot of people here want to earn high wages but are reluctant to pay the price at the checkout. This is fair enough as every one wants to pay as little as possible, however people must understand that we live in a protected environment in Australia, we enjoy great wealth and a very high living standard. At the end of the day sending our money overseas is costing jobs and costing our government (thats us) billions in Duty and Gst not to mention tax from the flow on from the local purchases(GDP).

Will the government lift the exemption on sub $1000 transactions? it would be politically very, very unpleasent for Labour to do it, but it will happen just as it has happened overseas- the wheels have started turning. Sure their will still be cheap deals overseas, the world is a big place, thats the way it is but we have to understand that there is a price to pay for living in an artificial environment.

Because you can go across the road to JB Hifi and get the same item for at least 10% less sometimes 20% if you hackle a bit.

Because overseas retailers have different economies of scale. I help out at windsurf store in Germany during my uni years. We were one of the biggest stores volume wise in the country.

I remember taking delivery of 500 sails from Gaastra at a time. Or having F2 deliver 50 boards at once. From what I remember our North volume discount was somewhere between 20 and 30 % below the standard wholesale price. At the end of the season we would regularly buy up the entire remaining stock of a particular sail (sometimes as many 200 sails) and get a further discount.

We would then undercut every other retailer by 10 to 15%. Most of our business was mail order. Flat rate shipping of a board was $50. I don't remember ever selling a board for more than $1200 and sails generally would sell for around $350. If you ordered over $2000 worth of gear shipping was free.

Remember though that the market in Europe is about 6 to 8 months behind Australia. Meaning we would never get volume deliveries before April / May when the market started to pickup. Peak season was around September with the remaining stock being sold around January during the Boot trade fair in Duesseldorf.

Fun times... but those low prices were only possible through sheer volume. When you are one of 4 retailers in the country that pushes the majority of gear you pretty much have the distributor by the balls.

It's good to see a thread about economics on the Seabreeze forums!

So Phil, you're advocating a reduction in the GST-free threshold.

At what level do you think the GST should be levelled, and how much impact do you think such a reduction would have on a business such as yours?

Have you done any sums on this?

Clearly a threshold of $0 is not feasible as the cost of collection on very small amounts would vastly outweigh the revenue raised and would therefore amount to a (very ineffective) subsidy for local retailers.

It's seems like you have identified a problem but nobody has clearly advocated a solution.

What if treasury modelling does / has already determined that $1000 really is the level beneath which it is not efficient to collect GST on imports?

If it could be demonstrated that lowering the threshold would increase net GST receipts and boost local reatailing, then it would be hard to argue against doing so.

I know that is what is being stated by the pollies but I'm afraid there has been no official study into this. I believe this is political propaganda, this could be costing the country way more in missed taxes than people realize. Oh, and since when is government "cost efficient".

Let's assume for a minute that this is correct (I think it is too), then reducing the GST threshold to $50 is not only going to cost consumers an extra 10% on their imported goods, but it will also burden all taxpayers with the difference between the revenue collected, and the cost of collecting it.

You could argue that this is still acceptable, provided the cost was exceeded by the benefit to society as a whole, from the boost it gave to local retailers and the benefits downstream from that.

This is why it would be interesting to know from Phil how much his business would gain if imports over $50 were subject to GST. For example, would he employ an other person?

Any other bright ideas?

How do you do those yellow boxes?

It would be this.

Say $50 wholesale incl post, then say $5% duty, $55, then IPDC $49, now at $104, then say the overseas shop wants 33% mark up, $138, then gst $152.

It's ludicrus, but that's why things have always been so expensive in Australia, and it's why when my customers come to me for something they need urgently, like an obscure part, the best possible service I can give is to hide under the desk. Then it compounds it because of course one of the big reasons people shop overseas is because of the greater range.

So Phil, in essence you are advocating an improvement in the efficiency of GST collection on imports, that would enable GST to be collected on items over $50, possibly using harsher penalties for evasion. This may be revenue positive, or at least neutral, and put local retailers in a better position to compete with their overseas counterparts.

It's fair to say pretty much anyone would agree that more efficient collection of any tax is a good thing, as then we may have to pay less of it! (or at least get more societal benefit from the tax we pay).

This is pretty much exactly what the introduction of the GST was for though, and you're suggesting it should possibly be abolished altogether.

This is obviously not going to happen, and the simple reason for that is this; without the GST, an even greater proportion of Australians (and the proportion is already large!), would pay virtually no tax at all. This must increase the burden on the (reduced) proportion who do contribute to society by paying tax.

As our society ages, the proportion of those who must support the rest of society can only decrease, and the problem would worsen. As it stands it is highly likely that the GST base will have to be broadened and/or the rate increased in the medium term, unless we want to go the way of Greece.

At least under the GST, almost everybody makes some contribution, however small.

More accurate to say this:-

I was asked for some theories and put a few out there, but no expert, all I can really do is just read the customs website and do some simple maths.

The problem is much more with the Duty and the IPDC than the GST.

I think the Greeks have been let down all along by their Government so just stopped paying any of their taxes.

People have to have faith in the system, otherwise then what?

Don't feel guilty about buying offshore, you'd be crazy not to.

With the warranties too, if things don't change I'll jump on the boat too and set up WA SURF Offshore, then just use myself as the local warranty agent, pay overseas business tax too, tug a few patriotic heartstrings in the advertising. All bases covered, but insane that I would have to do it.

Gerry Harvey has been running with the ball and look what happened there.

Having said that 'Freedom's just another word for nothing left to lose', you should hear me sing!

SO HERE IS THE CALL TO ARMS.

The end game for any business operating under the current rules is:-

Have in Oz a showroom and warranty centre, but do all the selling from an offshore business, they can even log on in at the showroom for the sale. The customer will still get good local service. It's completely nuts.

Those figures again straight from customs.gov.au
o/s wholesale $110 incl post, 33% mark up, $146
local, $110, then duty, $120 then IDPC $169, 33% m/u $225, GST $248

I have been thinking about this a lot, all debates on this subject generally disintegrate into a shop v shop or customer type of thing and also get shut down by moderaters pretty fast.

But I'm going the public education route, business has been saying 'the high prices are because of the Government charges and red tape' so I am pulling the facts straight from the Customs website and showing the public. Delta Goodrem was busy so I have done it as humorously as possible.

Any type of individual customer service stuff is not relevant it just muddies the water, same when people talk about high wages etc.

But the internet can help hugely by educating the masses quickly, imagine if every shop owner in every sport did what I am doing, the problem would get sorted. Very important to only talk about the one thing though, Government charges and taxes on imports, nothing else.