Right: ... and I've been good all year. Is time running out for the retail store Santa as online shopping threatens his and other shop workers' jobs?
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Arguments in favour of taxing more on-line purchases
1. Bricks and mortar retailers have larger overheads
It has been noted that bricks and mortar retailers, that is, those with a physical premises, have greater costs or overheads than their online competitors. They are likely to have greater rental charges, service charges (such as power and other utilities) and staff costs.
On August 2, 2012, The Punch published an opinion piece by Frank Zumbo, an Associate Professor within the School of Business Law and Taxation at the University of New South Wales. Professor Zumbo stated, 'Even before a bricks and mortar retailer opens their doors they are hit with rents from retail landlords and shopping centres. That means that the retail prices at bricks and mortar stores will obviously be inflated by the retail rent that they have to pay to the landlord or shopping centre.'
The professor went on to further highlight the financial advantage enjoyed by online retailers. Professor Zumbo noted, 'In contrast, the online retailer is likely to pay a tiny fraction of the rent that the bricks and mortar stores have to pay and that means the online retailer can offer much lower retail prices to consumers when they shop online.'
It has also been claimed that consumers are increasingly using bricks and mortar retailers to 'showroom' a product before purchasing it at a lower price online. This means the consumer trials the product in the higher cost physical premise before actually buying it elsewhere. Such practices only increase the financial disadvantage at which physical retailers find themselves.
2. Untaxed online goods are unfair competition
Many Australian retailers have claimed that allowing online sellers to avoid imposing a tax on goods they sell below the value of $1000 give them a further unfair advantage over the bricks-and-mortar retailer.
Speaking of current conditions for Australian retailers, Margy Osmond, the head of the Australian National Retailers Association, has stated, 'The sector cannot afford to lose more crucial Christmas trading periods before we see a level playing field for Australian retail, while overseas retailers have the upper hand.'
In a media statement made on May 1, 2012, the National Retailers Association stated, 'The onus is ... on the Federal Government to address the unfair import arrangements applying to on-line sales, and allow Australian businesses to compete on an even playing field with their foreign rivals.'
A similar observation has been made by Mark McInnes, Premier Retail chief executive and former David Jones CEO who has claimed that the unfair tax and government policy were the biggest factors behind Australia's retail slump.
Mr McInnes stated that the recent collapse of the women's fashion chain Ojay was another example of the impact of the tax regime. Mr McInnes said, 'They (online importers) have a 15 per cent unfair advantage.'
Bernie Brookes, Myers chief executive has further stated, 'We've always been of the view that there's not a level playing field if offshore retailers can escape the goods and services tax and import duties.'
Gary Black, the executive director of Australia's National Retail Association has claimed, 'Australia's $1000 low value threshold on foreign online purchases is highly inequitable when you consider that in countries such as the UK the threshold is as low as œ15 ($A23.25).'
3. Australian retail is in decline
In the online magazine Inside Retail and article was published on July 18, 2012, which stated, 'During 2012, Australian retail has suffered an unprecedented decline.'
The article then specified that, 'Smart Company has calculated that publicly announced store closures alone numbered 650 during the last six months with over 1600 jobs being lost; 300 more stores have been earmarked for closure during the next two years.'
It has been argued that Australian retailers are over-servicing given the level of demand within the country, that is, there are more retail outlets than there is consumer demand to warrant.
BIS Shrapnel, in its recent 2012 retail property sector report, warned retail was in for a very difficult decade despite forecasting overall growth. It calculated that new retail floorspace construction is still growing at a rate above population growth as well as retail spending growth.
Retail sales figures released in August showed the worst retail growth in fifty years. In an article published in The Australian on August 4, 2012, it was stated, '
The 1.6 per cent annual rise in spending is the worst result since 1961-62 - an era when there were no credit cards and shoppers used pounds, shillings and pence.'
On September 3, 2012, World Business Press Online published an article which included an overview of the current decline in Australian retail spending. It stated, 'Spending at department stores decreased 10.2% in July, which is the worst month performance in seven years or since April 2005. Weak results also increase concerns about job security. Consumers also spent 2.8% less on other retailing, a category that includes pharmacies, newspaper shops and book stores.
4. Online sales are causing a loss of jobs in Australian retailing
Gary Black, the executive director of Australia's National Retail Association has claimed recently, 'If we don't act, on our modelling, the Australian retail sector will lose 33,000 jobs. Thirty-three thousand Australian jobs will be shipped offshore between now and 2015.'
In April 2011 the National Retail Association had claimed that the surge towards internet shopping would strip Australia of about 50,000 jobs over the next five years.
Both estimates suggest that the growth of online shopping will have a major negative impact on employment within Australian retail.
Employment in the retail sector was falling all through 2011 through a series of collapses among large retail outlets.
Andrew McClennan, the Commonwealth Bank's retail analyst, has stated, 'But also there is no doubt there are going to be significant layoffs through further business failures.'
Julie Toth , an ANZ economist, has noted that job losses in the retail sector are likely to feed through into the wholesale and the transportation industries. Ms Toth stated, 'Because retail has been terrible for so long, it really is a major risk in the labour market.'
A report by Ernst & Young has concluded that 118,000 traditional retail jobs will be lost in Australia by 2015 because of the switch to online retailing - representing the demise of one in 11 traditional retail jobs. It said most of those job losses would be in typical non-food sectors, such as department stores, electronic shops and clothes stores.
5. Australian governments are losing a great deal of tax revenue
It has been claimed that by not applying a GST to goods purchased online from overseas at a value of less than $1000 the various state and territory governments were losing a great deal of revenue.
Gary Black , the executive director of Australia's National Retail Association has claimed, 'A study conducted for the NRA by accountants Ernst & Young found the failure to amend the low value threshold would deny Australia's states and territories up to $2.45 billion in potential GST distributions between 2012-13 and 2014-15.'
Mr Black has further stated, 'The loophole, which is denying the states and territories access to much needed additional GST revenues, is a double blow to their respective economies because the low value threshold also poses the greatest threat to traditional retail jobs and domestic online retail growth.'
Russell Zimmerman, executive director, Australian Retailers Association (ARA), has stated, 'The ARA welcomes the ... recommendation to address parcel processing inefficiencies with better border protection and collection processes, which will help close the current revenue trapdoor causing state governments to miss out on millions of dollars in valuable income.'
Mr Zimmerman has further urged the states and territories to avail themselves of 'desperately needed revenue stream for state and territory governments.
Margy Osmond, the chief executive of the Australian National Retailers Association has similarly noted that it was important to remember GST did not go to retailers.
Ms Osmond has stated, ''The GST that's collected in this state will be going back into communities across the country.' The association has proposed a threshold of $100.
Mike Baird, the New South Wales Treasurer, has called on the Commonwealth to consider reducing the GST threshold on online goods from $1000 to $30, following the release of the final report of the Low Value Parcel Processing Taskforce. The Taskforce report has suggested that these taxes could be collected economically.
The Victorian Treasurer, Kim Wells, has backed plans to impose GST on online foreign purchases after a new report found such a move could boost Victoria's bottom line by more than $500 million over three years.
The report, by Ernst & Young, estimates scrapping the so-called low-value threshold - where goods bought online worth less than $1000 escape the GST - would raise $564 million over the next three years for Victoria.