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Online sales onslaught continues amid call from CHOICE not to create ‘internet tax’

Thursday, 6 February 2014 | By Melinda Oliver

Australian consumers spent $14.7 billion on online retail in the year to December 2013, with momentum up in the last month of the year, according to the NAB Online Retail Sales Index for December.


The figure equates to around 6.5% of spending with traditional bricks-and-mortar retailers, not including cafés, restaurants and takeaway food outlets, in the year to November.


In December 2013, in seasonally adjusted three-month moving average terms, online sales expanded 1.58% in December. The index increased in December to a seasonally adjusted 240 points, up from 237 points in November.


The growth followed a relatively flat period from August through to October.


Sales of electronic games and toys were up 32%, groceries and liquor sales were up 24% and media was up 21%.


The only category to drop was personal and recreational goods at -1% year-on-year.


NAB reports that in year-on-year terms, the online index grew 12.6%, an acceleration on the November result of 11.2%.


The figures come as consumer group CHOICE made a submission to the government ahead of the 2014-15 federal budget arguing a push to drop the GST low-value threshold to include imported goods valued below $1000 would far outweigh the benefits.


CHOICE claims consumers could face a 37% tax on overseas purchases, and a bill in excess of $823 million.


CHOICE chief executive Alan Kirkland said in a statement the consumer group urges the government to resist retailers’ calls to lower or abolish the LVT, “in the absence of a business case proving its feasibility, and significant reforms to parcel processing”.


“Without such reforms, a reduced LVT would cost more to administer than it would raise in revenue, effectively creating a new $823 million ‘internet tax’ on consumers,” he said.


“Worryingly, this figure is likely to be higher when the other costs associated with collecting the tax are added,” Kirkland says.


CHOICE said its research found 76.5% of foreign online sales were under $100 in value. It said in most instances, consumers would pay more to collect the GST in fees than the government would receive in tax revenue.


The consumer group said the retail sector has publicly advocated imposing collection fees in line with the current UK system, in which Royal Mail charges consumers approximately $14 for the costs of collecting value added tax on parcels.


CHOICE said if a similar system was introduced in Australia, a $20 product bought from an overseas website could cost $36 and remit just $2 in tax revenue.


This article first appeared on SmartCompany.