Economics for Managers: Analysis of Turnbull's Online Shopping Tax System in Australia

Economics for Managers 1
ECONOMICS FOR MANAGERS
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Economics for Managers 2
Economics for Managers
In the past two decades, Information and Communication Technologies (ICT) have
reached high new highs of sophistication and experienced consecutive cost reductions. Both
factors have eased the adoption of these technologies by many firms, along with the general
population, leading to increased access to internet structures. This technological progress has in
turn catalyzed in the formation and growth of electronic commerce. In this setting, the Internet
permits for consolidation as an additional commercial channel through which merchants gain
access to their target markets.
Increased application of e-commerce for local actions awakens an interest in research in
this field because of its economic effects. It is commonly accepted that features of the Internet
would bring about greater market efficiency, in agreement with economic models of perfect
competition (Wacziarg and Welch 2008). This belief is premised on the notion that the use of the
Internet infers lower search outlays for the household. The correlation between the balance price
and the costs above was deliberated by Amiti and Konings (2007) who indicated that rates could
stay over marginal costs if a certain amount of search costs exists, even in the case of
homogeneous merchandises.
In contrast, Bernard et al. (2011) hypothesized that low search costs connected to online
shopping would encompass a price reduction to the number of marginal costs in the case of
homogeneous merchandises, with lower price declines in the case of heterogeneous
commodities. Given earlier studies in this particular area, there exists a need to examine to what
level the Internet is more efficient than the traditional channel for retail markets and the short run
and long run effects it can have to any particular country. For this paper, the analysis is centered

Economics for Managers 3
on the Australian economy especially with the introduction of the Turnbull’s online shopping tax
system by the government.
Q1
The article is about Turnbull government’s plan to impose the tax (GST) on all online
purchases. For the most prolonged period, multinationals have been evading paying tax which is
the primary source of income to the government. Despite the cold reception of the policy, this
move by the government is justifiable as it seeks to tap into the unexploited area that all
potentials to enrich the government expenditure on public goods.
On one side, multinational companies such as Amazon and Amazon and eBay express
their disappointments with the platform arguing that it high restricts the Australians an
opportunity to shop for a variety of products across the word and at fair prices (Chung, 2018).
For instance, Amazon believes that shifting its purchasing platforms from Amazon.com to
Amazon.com.au will deny the inhabitants a chance to shop from a variety of traders and expose
them to increased prices for the available goods.
On the other side, the government maintains that the move is aimed at increasing
efficiency in the Australian economy as it will not only generate revenue to the government but
also impose a fair ground for both local and multinational companies to trade (Chung, 2018). As
such, the government of Australia deems it ideal to impose GST on all online trades for the
benefit of the Australian economy. With the two sides of the story about the introduction of
Turnbull’s online shopping tax platform, the topic is still attracting debates from scholars,
analyst, and consumers not only in Australia but all over the whole world.