Online retail giant Amazon started an order-taking trial suggesting that it was about to enter the Australian market. The trial begun on Thursday with the search box of Amazon’s Australian website automatically filling in names of products. Amazon has so far declined to disclose its launch date in Australia.
For a long time Australia has had sellers registered on Amazon though they had to send their products offshore since Amazon didn’t have a local warehouse. Consequently Australians have had to endure long waiting periods as well as incur high shipping costs.
Intense competitive threat
Though online vendors stand to benefit, the traditional shopkeepers will be under immense pressure owing to the competitive threat that Amazon poses. Since Amazon announced plans to enter the Australian market, the shares of the largest electronics retailer in Australia, Harvey Norman, have fallen by 9%. Shares of Myer Holdings Ltd, the biggest department store in Australia have also fallen by 39%.
“It’s not as if the majority of retailers in Australia are making a fortune and growing their businesses. If you’re in clothes and shoes and handbags, you can’t take a lot more pressure,” said Harvey Norman’s executive chairman, Gerry Harvey.
Amazon’s warehouse has been set up in Melbourne, the second-biggest city in Australia and which is in the east coast, home to approximately 80% of Australia’s entire population.
Shadowy tax affairs
The expected launch of Amazon in Australia comes at a time when there is speculation that the online retail giant will funnel revenues generated in the world’s 12th biggest economy through Luxembourg as a tax-avoidance strategy. This is because the corporate tax rate in Luxembourg is 7% while in Australia it is 30%.
One month ago Amazon was ordered by the European Union to repay close to $400 million Australian dollars to Luxembourg over ‘illegal tax advantages’ which allowed almost 75% of the e-commerce giant’s profits to be untaxed. The bone of contention is how Amazon in Luxembourg charges various subsidiaries spread across the world in high-tax jurisdictions for its online sales system technology thereby drastically reducing the amount of taxable profits in places like Australia.
In the United States, the IRS (Inland Revenue Service) had filed a case in court against the Seattle, Washington-based online retail giant demanding unpaid taxes totaling over $1.5 billion. According to the IRS, Amazon managed to evade those taxes using firms that are registered in Luxembourg. Though the shadowy tax affairs of Amazon were revealed by the case IRS lost the case earlier in the year.