Harvey Norman CEO calls for GST on more online overseas purchases

HARVEY Norman’s Katie Page has issued a new call to the government to charge GST on overseas shopping transactions under $1000.

Katie Page, with husband Gerry Harvey, has called on the government to review GST-free online international shopping.

HARVEY Norman’s Katie Page has issued a new call to the federal government to charge GST on overseas shopping transactions under $1000.

In an interview with The Weekend Australian, Ms Page said retailers “had their hands tied behind their backs” because they had to pay customs duty on imported goods as well as GST on their business, while Australians could buy goods from retailers from overseas for less than $1000 GST-free.

“Why is the Australian government subsidising overseas retailers to ship into this country?” Ms Page said.

“They have no assets and pay no GST. But the federal government insists that all Australian retailers do so. It’s just unfair.”

At the same time, the Harvey Norman chief executive has signalled a distinct upturn in optimism about the outlook for the economies of NSW and south-east Queensland, which she said was feeding through into improved business for Harvey ­Norman.

She said she and husband Gerry Harvey, Harvey Norman’s executive chairman, were “feeling really good about NSW, which is the first time for a long time”.

“We are also seeing the strengthening of the economy in southeast Queensland where we have a lot of stores,” she said. “This is good news.”

Five years since Mr Harvey first raised the issue, as the rise of internet shopping and the strong dollar made buying overseas goods online attractive, Ms Page said she hoped new Assistant Treasurer, Josh Frydenberg, would act on his promise to review the issue. “Josh absolutely gets it,” she said. “One of the first things he said is that we have to do something about this.”

Mr Frydenberg, who was promoted to the job in the December Cabinet reshuffle, said recently that the issue would be discussed as part of the lead-up to the government’s white paper on tax.

While Australian retailers including Myer chief Bernie Brookes and Solomon Lew have long complained about what they see as the tax inequity, the government is also aware of the potential political backlash from younger online shoppers having to pay GST.

In a report issued in 2011, the Productivity Commission estimated that imposing a tax on international transactions under $1000 would cost several times more to administer than the revenue it would raise.

Harvey Norman’s shares surged this week to a two-month high on the back of a profit ­upgrade by broker Merrill Lynch, which has set a target price of $4 a share for the retailer as falling petrol prices flow through into more discretionary spending.

JPMorgan’s economists this week estimated that the fall in oil prices was the equivalent of a 25-basis-point cut in interest rates.

The flow-through is particularly positive for consumers in less affluent areas such as the western suburbs of Sydney and Melbourne, where people have to spend more of their budget on petrol and often have to drive longer distances to work.

“Fuel is a higher proportion of the spend for the less affluent consumer that has a high propensity to spend incremental monies than save,” the JPMorgan economists said in a report this week.

JPMorgan is estimating that Harvey Norman will see revenues rise from $2.4 billion last financial year to $2.6bn this year with earnings before interest, tax and depreciation up from $323 million to $406m.

While Mr Harvey attributed this week’s share price surge to an improvement in sales in recent months on the back of lower petrol prices and lower unemployment, Ms Page was a little more cautious. She described the Christmas trading period for Harvey Norman as “stable”.

“We have been telling the market for some time, and we keep telling the market, that business is stable,” she said. “It’s not booming, but it’s good.”

Ms Page said the lack of a level playing field with the GST was having an adverse effect on the economy because of the flow-on impact on local jobs, investment and government revenues. “Retail employs 10 per cent of the workforce,” she said. “You have company tax dropping because these companies (retailers) are producing less profit.

“You have industries like the media which are getting fewer dollars from advertisers. It flows through to local employment.

“We have assets in Australia and employ a lot of people but when you are shipping from overseas it is just a shopping transaction — you are not employing people here.

“The GST came in before the digital age. There was nothing there when they put in the $1000 minimum. There was no contemplation that the dollar would go to where it got and that people would be able to shop online so easily.

“The law hasn’t changed since the early noughties. Isn’t it somebody’s job in government to make sure they keep it up to date?

“We are in a global village, we are digital. If you are good at what you do, your business will go well.”

But Ms Page said it was “just not right” that Australian companies had to charge GST while foreign retailers did not.

She said several recent changes, such as the falling Australian dollar and the strengthening economies in NSW and Queensland, were starting to have a positive effect on some businesses such as tourism and retailing.

“A lot of businesses have had deflation for many years,” she said. “This time last year the Australian dollar was almost $US1.10 against the US dollar. Now it is down to around US80c.

“When the currency drops down this much there is going to be a change.”

Ms Page and Mr Harvey have just returned from a strong sales year for their annual Magic Millions horse sales business on the Gold Coast.

Ms Page said sales were a record for any year since the global financial crisis, reflecting an ­increasing optimism about the economy.

She said the strengthening of the NSW economy was good for Harvey Norman, which had 35 per cent of its business in the state.

“And we are seeing a strengthening of the economy in south-east Queensland. Their real estate prices dropped dramatically, particularly on the Gold Coast, but that seems to be coming back now,” she said.

Ms Page said NSW was benefiting from the policies of the state’s Liberal government, first under Barry O’Farrell and now under Premier Mike Baird.

“We are now seeing the work they have done on infrastructure spending,” she said. “They hit the ground running. They said they were going to put dollars where they are needed.”

Ms Page said the NSW economy had been in a long slump since the end of the 2000 Olympics in Sydney.

A lack of infrastructure spending had particularly hit the western suburbs of Sydney, which “missed out”.

“Gerry and I are feeling good about NSW, which is the first time for a long time,” she said.

“We are seeing a strengthening of the western suburbs.”

Ms Page described Mr Baird as “very impressive”, saying: “He has got a business background and he knows what has to be done. NSW has to be the engine room of the Australian economy because of its population.”