Harvey Norman is at it again, with managing director Katie Page now warning Australia could face a retail exodus overseas if the Federal Government doesn’t do anything to make offshore companies subject to GST.
However, analysts are sceptical, suggesting the comment is more of a rallying cry around the GST debate.
The threat comes just after the government released a lukewarm response to the low-value threshold taskforce report, which recommended sweeping changes to the postal system that would make a lower GST threshold revenue-positive.
It also comes after Harvey Norman just released disappointing full-year figures in which it confirmed a 31% fall in profit.
Page said at a superannuation conference yesterday the company would examine its approach “one step at a time”, according to Fairfax, although admitted this would have negative ramifications for the industry.
”They [other retailers] can actually be setting up in Hong Kong – anywhere in Asia now actually, Hong Kong is the favoured place. There’s lots of advisers going around, speaking to thousands of retailers at the moment, saying, ‘Just set up the company in Hong Kong and ship into this country’,” she said.
Page then said this would obviously hurt the domestic retail industry.
Page commented that shopping overseas to avoid GST ignores the fact the tax pays for local services and does the country a disservice.
When asked if Harvey Norman would actually make that move, Page said while it would be “the worst thing an Australian company could do…it could solve a lot of problems”.
Page also criticised the government for not changing the current GST structure, and said she especially feels sorry for fashion retailers.
”How would you like it if overseas competitors could ship into this country and have costs of up to 50% less than yours, because they government hasn’t dealt with this issue?”
But analysts aren’t so sure. Peter Esho, retail analyst at City Index, says he finds it “hard to believe” the company would leave Australia considering its asset base is here.
The rest of the comments, he says, could be construed as Harvey Norman gearing up for a fight – and about much more than just the GST.
“I think Harvey Norman are trying to notch up their lobbying to create a more level playing field. However, the effort could probably be better focused on improving the customer experience and finding new growth markets which many other smaller players don’t have the financial capacity to tap into.”
“Like stationery, for example, where Harvey didn’t succeed but at least there was an attempt to give it a shot.”
Other Australian retailers have admitted to exploring offshore solutions in the past, where they house stock offshore and them import in order to save on GST costs.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
