Re-think the Internet Sales Tax

It would appear to the average reader that once the item is available locally, the consumer then has a choice. If this is the case, what is the rationale behind the Minister saying of the objective, “Reducing the demand for these items helps to save on foreign exchange”.

After all, the items will be purchased abroad or here, by either a wholesaler or a retailer. Let us be clear that in many instances most items we consume are imported.

This is reflected in our already large and steadily growing import bill. The choice to obtain a particular item either entails consumers importing it themselves or buying it from a retailer who imports the item. How is this saving foreign exchange? What local industry is the Minister taking about when he speaks about providing assistance? There is the need for transparency and great clarity.

How many businesses have moved out of manufacturing and into retail sales in this country? A simple check with the Central Statistical Office can provide that information. There should be a concern about how bloated the retail sector, that does not engage in productive activity but simply imports and adds a markup, has become. It is indeed questionable if any foreign exchange will be saved by this measure. In fact, all consumers will do is determine whether the item will be cheaper with the tax or not.

Has there been any study to support what clearly is a questionable policy decision? If the objective is to curb consumption then additional taxes to reduce disposable income, reduce aggregate demand and so reduce demand for foreign exchange would make far more sense. Perhaps putting tighter controls on access to foreign exchange or limits on credit card use might be more effective in achieving the Minister’s stated objective.

The increase in overall prices on goods caused by the introduction of the sales tax will encourage additional competition between virtual and brickand- mortar stores. While a vast majority of transactions are still conducted in stores near where consumers live, these stores have undoubtedly lost customers as a result of e-commerce. As the percentage of sales transactions shift toward the virtual and away from the physical, the government possibly was increasingly aware of the possible lost tax revenue. The idea then could be that if goods purchased over the Internet are taxed, this will raise the prices of the goods to the consumer. It may drive people back into brick-and-mortar stores to shop, which may help local economies and of course government revenues, assuming these store owners pay taxes.

However, all this is taking place at the expense of all of us the consumers, who are being asked to pay more, lose choice, possibly settle for goods of lesser quality and limited differentiation.

The issue is who really is standing to benefit from this measure? Why so close to Christmas? Is the timing by chance? The benefits of the added tax revenue of $70 million, will largely depend on how the government allocates the additional funds. That this is clearly prejudicial and targets only one form of retail sales needs to be explored legally.

Let us hope the Minister has a rethink.