The recent introduction of tariffs on spectacle frames has no effect on Australian manufacturing, highlights the weakness of the border force regulatory system and shows the damage that can be done to an industry by a single disgruntled entity.
A quick recap: in mid-2022, an Australian eyewear company requested that a 5% tariff be imposed on the import of plastic spectacle frames. Further, this tax was then extended to cover metal spectacle frames in 2023. The motivation was that imposing a tax on spectacle imports would help Australian eyewear manufacturing. You would think that with extensive federal public service resources at hand, this type of request would garner detailed scrutiny to evaluate its effectiveness – that it couldn’t be possible to introduce a 5% tax on a majority of frame imports without some detailed explanation? Unfortunately not. A short submission from one company was all it took to introduce a tax costing the industry millions.
It is correct that this tax only applies to imports from countries where Australia doesn’t have a free trade agreement (FTA) – China being one of the main manufacturers where we have an FTA. Unfortunately, most brands that manufacture in China (which is significant) consolidate the goods from the many suppliers in central warehouses located in Europe. The recent break-down in negotiations over an FTA with the EU means the tax still applies (it’s not where the goods are manufactured, it is where they are shipped from), and the government continues to collect its payments at the border.
So who pays? A nuanced issue no doubt, and one that could be long-debated. But in reality, the price gets passed firstly on to retailers and then consumers. With all the talk of a government doing what it can to “lower the cost of living”, here is a concrete example of the opposite. However, a second, more regrettable outcome is that the tax gets paid by reduced investment in local businesses. Spectacle frame wholesaling is competitive, and while we all still see the Australian market as strong and stable with a good future, nothing dents confidence like the imposition of new/unforeseen taxes with no basis.
The large chains that purchase direct from China factories may have escaped this tax, while the locally owned distributors and subsidiaries are bearing the cost disproportionately along with independent retailers who purchase from local companies. These wholesalers are the companies that are the main employers of the spectacle supply industry – not Australian manufacturers. A 5% increase in the cost of goods, on top of inflationary pressures, is more than enough to reconsider the employment of the additional warehouse worker, the renewal of the office IT infrastructure, the advertising campaign spend or the practice point-of-sale creation. Thinking that this tax miraculously has no impact on investment decisions is a fantasy.
And the outcome for Australian spectacle manufacturing? We didn’t see any presence at recent trade shows, no advertising in trade magazines or any recruitment for more reps to push the Australian made frames. Even in the words of the company that prompted the imposition of the tax, the “tariff won’t make a monetary difference to my business” (Insight, June 2022). Please make no mistake, supporting Australian manufacturing is a great initiative. Safilo Australia has recently launched the FULL CIRCLE program and SMITH RX partnership with CR Labs, an Australian manufacturer which is a true success story of Australian made. Adam and his team at CR compete because they manufacture great quality product, bring innovation and support to optical practices, and do it locally with a highly skilled workforce at a competitive price. We are proud to be associated with CR Labs.
In the end, the solution to this mess is for Australian Border Force, and the relevant federal minister (Clare O’Neil), to actually understand the impact of their decisions. A tax has been imposed that has no benefit to the Australian economy and no-one has asked “why?”. In our wonderful democracy, it’s fine for a company to try and make costs higher for everyone else, but it should be the role of the government who collects those taxes to at least check if it is a good idea. It is unacceptable that taxes can be imposed without any decent scrutiny, and even more unacceptable that the representations of our industry body have been ignored by those imposing the tax.
In the overall federal budget, the revenue from this tax is an extremely small issue, it’s difficult to explain and affects an industry without much political power. However, the principal eats away at the credibility of government and the public service. Let’s not storm the capital, but as an industry we shouldn’t accept poor decisions.
About the author
Name: David Pearson
Affiliations: Safilo, senior director APAC