Vendors responsible for ‘Aussie Tax’: Choice

Australian consumer group Choice has pointed the bone at vendors for the infamous “Aussie tax”, in a submission to the Parliamentary Inquiry into IT Pricing.

Having studied the price of software, hardware, downloads and games in the Australian market, Choice has noted that Microsoft seems to want Australian developers to call by and say "hello": it's cheaper to buy a ticket to America and pick up a copy of Visual Studio 2010 Ultimate for $US11,899 than to buy it in Oz for more than $AU20,000.

While acknowledging that there are differences in taxes, wages, rent space, margins and logistics between countries, Choice’s submission singles out international price discrimination as the “most likely cause of Australia’s high IT prices”.

“As this increases the cost of retailers’ purchases (wholesale prices), it has a greater impact on retail prices”, Choice states.

In a recommendation likely to be fiercely resisted by rent-seekers in the industry, Choice calls on the government to educate consumers about “their right to access legitimate parallel imports from foreign markets” – at a time when local chennels are trying blackguard this practice with various campaigns against “grey markets”.

For example, last month retailer JB Hifi apparently abandoned its attempt to run its own parallel operation, redirecting its JB Hifi Direct Website back to its home page and pulling ads for the “parallel” products. The company has stayed mum on the reasons for the change, but at the time, both Canon and Nikon made veiled threats about retail relationships.

On average, Choice says Australians pay 52 percent more than American consumers for iTunes downloads, based on an analysis of both singles and albums (we can, however, pick up a couple of steals: if your taste runs to downloading Don McLean’s American Pie, or Billy Joel’s Piano Man, they are respectively 12 percent and 1 percent cheaper than in the US).

In the notorious games market, Call of Duty: Modern Warfare 2 was the standout, marked up by 342 percent over the US price; in a sample of ten games, the average gouging was 232 percent.

If we buy software rather than pirating it, we pay 34 percent over-the-odds on average (with some Adobe products surprisingly cheaper here than in the US at the time of the Choice sample), and a sample of Wii games averaged an 88 percent markup (compared to a UK-US price differential of just 26 percent). Finally, a sample of Dell hardware revealed a 41 percent markup.

Apple gets off lightly, by comparison, averaging just 12 percent higher hardware prices in Australia than in the USA. This is so close to Australia’s 10 percent GST that Choice notes prices are more-or-less in parity between the two markets.

Choice tested the widespread argument that Australian retail rents account for the price difference by looking at the differentials for software products, and found that the price differentials for online stores with no shopfronts (48 percent) were nearly identical to the recommended retail price differences for the physical products (49 percent). ®