Internet a threat, but red tape and regulations worse for retailers

The internet is a major threat to retailers, but red tape and regulations are worse.
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The Productivity Commission has released its draft report in to the retail sector, finding among other things, there are strong in-principle grounds to apply the GST and other taxes to overseas internet purchases worth $1000 and less, but it would be expensive to do immediately, would take some years to implement effectively, and have only a minor effect in reversing the alarming decline in domestic retail sales.

The draft report found that red tape, such as inflexible labour laws, zoning regulations and trading hour restrictions, is a far bigger threat to retailers than their online rivals.

'Other factors such as much lower prices, greater range of products - that is, choice - and convenience available online, appear to be far more important drivers [of overseas internet shopping],' said the nation’s peak economic advisory body.

The commission acknowledges the pressure 'bricks and mortar' retailers are facing but recommends broader structural changes to help them compete with domestic and overseas online sales, which now account for 6 per cent of sales annually, worth $12.6 billion.

These include changes to the industrial relations laws, with the commission saying the Fair Work Act, which replaced Work Choices, was too inflexible, and award modernisation had increased wages and penalty rates.

It also recommends the complete deregulation of trading hours by all states, and an overhaul of planning and zoning laws, which restrict competition by prescribing which types of businesses can be established in existing business zones.

It suggests zoning changes would increase competition among shopping centre landlords, making them reduce the sometimes crippling rents that exclude smaller retailers.

The commission said the use of 'adverse impact tests' to restrict new developments and preserve existing businesses was common in the planning system but 'unjustifiable'.

The government will not formally respond until the final report is released in November but it is understood it is looking at working with the states to make changes to zoning laws and retail tenancies to help small businesses.

More at www.pc.gov.au