This is a rather lengthy letter on the GST/Import question. It is an anonymous response to an online article but it does give an interesting perspective that we think is worth reading.
"To be able to compete with overseas online stores the current import regulations need to be changed, currently they add costs such as duty, gst and clearance charges to imports over $1000 which in practice effect business while consumer purchases from overseas avoid these additional costs which distorts overseas prices to be lower there than they are here.
To calculate the value of an import customs use the following formula:
Here is an example of an import with a customs value of $1000
Customs value $1,000.00
Customs duty @ 5% x $1,000 = $50.00 (Payable)
International transport and insurance $150.00
VoTI (value of taxable import) $1,200.00
GST @ 10% x $1,200 = 120.00 (Payable)
Customs Clearance Fee 48.85 (Payable)
Total payable (Customs duty + GST + Clearance Fee) = 218.85
There is also a credit card surcharge which i have not included.
Customs clearance costs as a percentage of the value of the goods is just under 22%
Here is an example of an import with a customs value of Less Than $1000
Customs value $800
Total Payable $0
So from these examples it is clear to see that a product imported as part of a import that is over $1000 has an additional 21.89%, if this was applied to imports under $1000 then the difference between prices here and overseas would be little.
Here is an example:
If I purchase a Cleanser, Toner and Moisturiser in Australia the cost would be $149.00 AUD
If I purchased the same products from the US the cost would be $104.85 USD or $98.91 AUD
So from the above example you would say that to purchase the same products here would cost you 50% more than in the US under the current import regulations.
Now let’s do the same example and apply a customs clearance to the goods purchased in the US:
Customs Value $98.91
Customs Duty @ 5% x $98.91 = $4.95 (Payable)
International transport and insurance $15.00
VoTI (value of taxable import) $118.86
GST @ 10% x $118.86 = $11.88 (Payable)
Customs Clearance Fee 48.85 (Payable)
There is also a credit card surcharge which i have not included.
Total payable (Customs duty + GST + Clearance Fee) = $65.68
Now lets add the customs clearance costs to the US purchase $98.91 + $65.68 = $164.59 compared to purchasing it here $149.00 . So we have gone from a situation where Australian consumers think they are being ripped off when looking at overseas prices to it actually being cheaper here.
This is for an example where prices are 50% higher here, there are other products that would be 100% higher here and the example would change to not be cheaper here but not by much and it would allow retailers to compete on price, currently if a customer comes into a store and says they will buy from overseas retailers know that they cannot offer a discount that is large enough to compete on price, if all imports were treated equally then retailers would be able to compete.
Let’s look at an example where prices are double the US price, lets use the above example and say the cost to purchase here is $200.00 and the imported price is $164.59, a difference of 17.71% which a retailer could compete with and offer 15 or 20% off.
Therefore i believe that the current import regulations create an environment that limits or prevents competition by retailers and importers.
To propose that imposing costs on imports over $1000 and nothing on imports under $1000 aims to foster the competitive environment I find hard to agree with, in fact it is the opposite.
In the EU it is normal for ALL imports to be cleared through customs and the relevant duties and tax paid so to argue that this is not possible is not correct."
Here is an example of an import with a customs value of $1000
Customs value $1,000.00
Customs duty @ 5% x $1,000 = $50.00 (Payable)
International transport and insurance $150.00
VoTI (value of taxable import) $1,200.00
GST @ 10% x $1,200 = 120.00 (Payable)
Customs Clearance Fee 48.85 (Payable)
Total payable (Customs duty + GST + Clearance Fee) = 218.85
There is also a credit card surcharge which i have not included.
Customs clearance costs as a percentage of the value of the goods is just under 22%
Here is an example of an import with a customs value of Less Than $1000
Customs value $800
Total Payable $0
So from these examples it is clear to see that a product imported as part of a import that is over $1000 has an additional 21.89%, if this was applied to imports under $1000 then the difference between prices here and overseas would be little.
Here is an example:
If I purchase a Cleanser, Toner and Moisturiser in Australia the cost would be $149.00 AUD
If I purchased the same products from the US the cost would be $104.85 USD or $98.91 AUD
So from the above example you would say that to purchase the same products here would cost you 50% more than in the US under the current import regulations.
Now let’s do the same example and apply a customs clearance to the goods purchased in the US:
Customs Value $98.91
Customs Duty @ 5% x $98.91 = $4.95 (Payable)
International transport and insurance $15.00
VoTI (value of taxable import) $118.86
GST @ 10% x $118.86 = $11.88 (Payable)
Customs Clearance Fee 48.85 (Payable)
There is also a credit card surcharge which i have not included.
Total payable (Customs duty + GST + Clearance Fee) = $65.68
Now lets add the customs clearance costs to the US purchase $98.91 + $65.68 = $164.59 compared to purchasing it here $149.00 . So we have gone from a situation where Australian consumers think they are being ripped off when looking at overseas prices to it actually being cheaper here.
This is for an example where prices are 50% higher here, there are other products that would be 100% higher here and the example would change to not be cheaper here but not by much and it would allow retailers to compete on price, currently if a customer comes into a store and says they will buy from overseas retailers know that they cannot offer a discount that is large enough to compete on price, if all imports were treated equally then retailers would be able to compete.
Let’s look at an example where prices are double the US price, lets use the above example and say the cost to purchase here is $200.00 and the imported price is $164.59, a difference of 17.71% which a retailer could compete with and offer 15 or 20% off.
Therefore i believe that the current import regulations create an environment that limits or prevents competition by retailers and importers.
To propose that imposing costs on imports over $1000 and nothing on imports under $1000 aims to foster the competitive environment I find hard to agree with, in fact it is the opposite.
In the EU it is normal for ALL imports to be cleared through customs and the relevant duties and tax paid so to argue that this is not possible is not correct."