Go Read This | Book battle: Dymocks considers offshore option – ABC News Australian Broadcasting Corporation

Fascinating story this. I’ve heard and been part of a few conversations about this phenomenon for some time. It is interesting both from the perspective of the booksellers and the publishing, and the state’s perspective. It demonstrates the way that external actors can undermine a state’s tax base. I wonder if, like in some US states, the government will actually start imposing a sales tax on foreign/non-state based outlets?

Take Stieg Larsson’s international bestseller, The Millennium Trilogy The Girl With the Dragon Tattoo, The Girl Who Played with Fire and The Girl who Kicked the Hornets’ Nest. Even on sale, they’re still $16 more expensive in store than from the UK, including delivery.

That is the dilemma for one of Australia’s biggest book sellers. Dymocks is considering moving its online business offshore because it says it cannot compete with cheap, online sales.

Dymocks chief executive Don Grover says overseas retailers have an unfair advantage because they do not pay GST.

“Dymocks has been in the business for 130 years, and we’re actually now having to make a decision about whether or not to move our online business offshore,” he told the ABC.”

It would actually make more sense for us to send books from an overseas location back into Australia and avoid the GST. To give a competitive advantage to overseas web sites of 10 per cent is just unsustainable.”

Don Grover says his company is already trimming its margins, and the success of cheap, international web sites is making it hard to compete.

via Book battle: Dymocks considers offshore option – ABC News Australian Broadcasting Corporation.

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4 comments

  1. The problem becomes, does the tax on a book recover the cost of collecting that tax? Assume that the Post Office must collect the tax – by the time you have installed a new layer of staff to deal with the collection process, the paperwork so there is a proper audit trail, and the costs of shuffling the pennies collected back to the tax authority, is there a net gain, or does all this cost more than it is worth? Tough question, I think.

    The alternative is some sort of higher tax on imports, and that raises more issues.

    And as digital goods become truly mass market, how can they be taxed? Will vendors flock to tax havens? Erecting walls to block Internet activity does not work too well, as China has found.

    Interesting times, these are.

  2. There are two obvious solutions, Eoin. The first, as you pointed out, would be to charge GST on internet sales from foreign vendors. I imagine this is pretty complicated for the Australian government to do. In Australia, GST is collected by the Australian Taxation Office via the quarterly business activity reporting submitted by all businesses. Doing this for foreign vendors would require those vendors to have separate price rules for sales they make to Australian customers, then report and remit the GST back to the Australian government. The logistics of implementing such a system and ensuring compliance is, I can only imagine, very complex.

    The other solution would be for the Australian government to make books a GST-exempt product. There are other products that are GST-exempt. I doubt they’d favour this option, however, since it would mean forgoing a significant stream of tax revenue and set a precedent for other retail categories.

    Because both solutions are costly and difficult I predict they will maintain the status quo and Australian book retailers (both online and bricks and mortar) will continue to be hobbled by a 10% price handicap.

    1. Books are VAT free in Ireland, but ebooks are not, which is a bit of an issue for those trying to bring ebooks to the people!

      I guess the second solution would be my preference, ie: remove the GST/VAT.

      However, my main point is that the change coming to Australia is driven by outside actors. This dynamic is reflected in the world of publishing where technology giants are the real drivers of change.
      Eoin

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