JB HiFi is demonstrating its care, or lack thereof, for Australia by starting a grey import service of goods from overseas. This service offers products which JB says are the same as what can be purchased from their stores. The difference is that the products are shipped direct to the consumer from overseas, avoiding GST.
While JB will say that they have to do this to counter overseas websites selling into Australia, my take is that their initiative disrespects Australian taxpayers. It dodges their obligation to support Australia, to be a good corporate citizen.
The JB HiFi move speaks volumes about ethics and social responsibility. They are putting their profit goals ahead of the needs of Australia as a country. they are doing this by pandering to greed – theirs and that of those who will purchase through them.
Yes, I want the federal government to address the tax anomaly. However, I understand the challenges of achieving this in a cost-justifiable way as a recent Productivity Commission report discussed.
JB HiFi should work harder to address the issue of collecting tax on items purchased overseas and shipped direct to Australian addresses rather than joining others to deny vital tax dollars which fund schools, hospitals, roads and other federally funded infrastructure and initiatives. Yes, this is a hard road. Equity can be like that. Imagine what life would be like if people always took the easy or greed route.
By helping, and even encouraging, Australian consumers to avoid paying tax JB HiFi disrespects us.
Mark, I wonder whether these GST avoidance ploys will stand up when tested in court.
While I’m certainly no tax lawyer, I know the income tax act has some fairly broad clauses to address these issues and I’d be genuinely surprised if the GST laws don’t have similar provisions.
Overall though, for JB and other sites like Myer and Harvey Norman, it’s not about the GST, it’s more about the “rip-off the Aussies” mentality that many international distributors and brands have which drives local consumers offshore.
Also, they’re going to have to compete in this space on service and website usuability as well as price, which is going to be a tough task.
From the link given in the original post:
-“Why is JB Hi-Fi offering directly imported products?”
-“JB Hi-Fi customers are requesting it.”
So Australian customers are directly requesting JB to source products from overseas?
Paul, I wonder this too. I hope that the JB pitch is tested. I also hope that the government finds a way to achieve taxation fairness for the sake of everything which taxation funds. Otherwise the pool supporting this country will continue to shrink – this is what the JB move is about to me.
I agree with you Mark. I do purchase goods online from overseas suppliers but not because it enables me to avoid the GST. I would be willing to pay GST on goods that I import into the country. Avoiding paying tax seems to be a national sport in Australia, and I don’t understand why. Aren’t roads, hospitals, schools and the like things that we all want in our communities?
Lets all have a go at it.
And end up like Greece, where tax avoidance is a national sport 🙂
Mark, I am the marketing director of JB Hi-Fi and we would like to respond to your opinion by providing you the perspective on the rationale behind our decision and some facts around impact. Firstly, this is not about GST but the lack of education on the impact of direct imports. At the moment you will note that no other direct import sites make any reference to the exclusion of GST and it’s social importance. We have concluded the best way to authentically educate our customers and the broader public on these facts is to draw on the exaggerated interest by participating when all other avenues have been exhausted. We are being obtuse in our efforts to educate customers on the value of locally imported goods and the implications of their choice as you will note from our direct import web page. From a government perspective you may also want to ask; why is the ACCC allowing an “apples with apples” price comparison by some direct importers with locally imported goods without disclosing the real value adds like GST and low risk mitigation via powerful Statutory consumer protections? Why is the ACCC allowing direct importers to promote prices without freight included in the price representation and the dominant disclosure that GST is the customer’s liability ? Secondly, this problem is unique to a particular category of products in our industry being Digital SLR Cameras and associated accessories where after GST we are still seeing up a 20% variance in prices. We are of the mind that 15% including GST is reasonable for Australian consumers but 30% is not and it’s up to some of these global manufacturers to level the the playing field. It’s not our style to stand back and watch long term customers think that it’s JB HiFi actually adding the premium and questioning the authenticity of our offer on 99% of everything else we sell. Also, because of this much of the turnover in this area is actually in items above $1000 and we have alerted customs to JB’s entry into this arena for the purpose of shipment aggregation and frequent address monitoring. In real terms there is still a material and significant amount of GST collected by the government through this category via direct imports. Mathematically we are talking about less than 100 items compared to the 200,000 other goods we sell that are locally imported and have GST imposed. JB Enthusiastically and successfully competes with global giants like Amazon and itunes USA without a level playing field on supplier pricing and GST via a vigilant approach to eradicating any wasteful cost. Many direct importers based in Australia attempt to circumvent more than GST in this model and have set up international entities. The margins in this cutthroat environment are slim and the real value to our bottom line is in protecting the goodwill and trust we have earned with our customers by maintaining their business across all our categories. The benefit of holding their custom will flow through to the Australian economy more so than allowing it to go into foreign entity coffers established by Australian companies. Thirdly, in our mind it’s not reasonable to accuse our customers of greed or social irresponsibility because as individuals they have a right to make choices offered to them that are legally permitted and their perspectives are functions of circumstances that I am sure that go beyond the avoidance of GST as they are just as likely to be socially generous in nature through other means. In fact many consumers appear to be doing this to make an ethical and socially admirable stance against greed. Fourthly, the productivity commission report into retail recently unequivocally rejected the lowering of the GST threshold for imports by individuals and told retailers if they were going to survive they had to adapt and innovate. This is what JB will always do to remain globally competitive in what is now a market without borders. If successful this is surely a socially responsible approach and will subsequently add more incremental value to the Australian economy. Finally, we do empathise with your opinion and hope this additional information may assist you in coming to a more moderate conclusion around our motives and more importantly the motives of our customers who pay the wages of over 6000 JB people and contribute in a manifestly significant way to the prosperity and social equality of Australia as a whole. Thanks for opportunity to respond. Regards Scott Browning.
Scott,
Thanks for responding here. I appreciate you taking the time.
I understand why JB has done what it has done. I don’t agree with it for the reasons I have outlined.
I’d prefer to see you use your market position, customer loyalty and brand awareness to push for change in the GST threshold.
I do agree with Scott.
Global Manufacturers are taking advantage of the Australian market and it through action like this that we can drive prices down for consumers so that they won’t feel the need to shop overseas. And it’s not just on Camera’s, it most goods manufactured overseas, especially in Asia where we pay a premium for these goods other countries much further away than we are from Asia get them considerably less.
iam a shareholder of jbhifi and i support Scott ‘s strategy and it is a win-win situation for everybody.the problem is the wholesalers who ripped the retailers off.
I’m torn on this issue.
On the one hand you have a circumvention of GST which deprives the government of income. However this only applies to relatively small purchases of less than $1K. Nonetheless it means less money for the collective Aust public.
On the other hand you have the argument that those consumers looking to purchase these products online are likely to do so anyway, regardless of whether JB offer their import option. From a tax perspective, we’re better off with an Aust company receiving that income than a foreign entity who pays no tax to the Aust government.
When it comes down the bottom line of tax regardless of the ideological issues the Aust government and public are actually better off with an Aust company like JB operating this kind of import business.
As the borderless global economy grows I fear we will see more issues like this when it comes to domestic sales taxes.
Jarryd, as the blog post indicates, I am focussed only on the ethics and social responsibility of the GST issue. My understanding is that it’s over $1B.
By no party with a voice taking a stand, other than Gerry Harvey’s shrill, people will purchase overseas and tax revenue will suffer.
Mark,
I guess the question I was asking was “is it unethical to offer circumvention of the GST if in doing so the government actually receives more tax revenue than if you didn’t”. That is to say by JB offering GST circumvention they are actually keeping profit in the country (where it is subject to income tax) as opposed to the consumer purchasing from an foreign entity where all profits are sent overseas.
Should JB take the ideological or pragmatic position? It’s this question that raises the bigger issue of whether or not domestic sales taxes are workable or even appropriate in an incresingly global economy.
Jarryd, Corporations law requires them to out their shareholders first so social responsibility and maybe ethics do not play a part.
That said, JB should put Australia and its needs first and work to get the inequity fixed.