Microsoft blames Australia for higher prices

Microsoft Australia has defended the so-called "Australia tax" on IT hardware and software, stating that Australia has stronger regulation and higher labour costs than many other countries across the globe.

The defence came in Microsoft's submission to the parliamentary inquiry into high Australian IT prices, which was launched by Labor MP Ed Husic.

Microsoft said it recommends retail pricing to the channel partners that it sells products through in Australia, but that it does not set the final price that the customer pays. Microsoft argued that prices will therefore vary depending on the size of the market, which in turn affects supply and demand. In addition to this, Australia has other costs, according to Microsoft.

"There are a range of additional factors that impact pricing in the Australian market, including the relatively high cost of labour and rent; the impact of Australian-specific regulations; the higher costs of marketing, training and advertising; supply chain costs, including transport, distribution and exchange rates," Microsoft said in its submission.

The tech giant noted that while software delivered online, such as the company's Office 365 product, does allow for a reduction in the costs for vendors, "the costs for providing services — including establishing, maintaining, supporting and advertising services — needs to be recovered".

The company also said that a like-for-like comparison of prices between the United States and Australia is often disingenuous, because Australian prices are quoted with GST included, while US prices leave off sales tax until the point of sale.

The Australian Industry Group's (AIG) submission largely agreed with Microsoft's stance, stating that warranty requirements within Australian law, and distribution costs, wages, rent, insurance and government taxes all add up to higher costs for retailers doing business in Australia. The group estimated that Australian businesses spend around 4 per cent of annual expenditure on complying with government regulation.

Australia's distance from the rest of the world is also a major factor affecting prices.

"The small, geographically disparate nature of the Australian market affects costs such as providing after-sales service and product maintenance and servicing," the group said.

The AIG recommends that the government remove "unnecessary regulation", and revise any regulation that places a burden on businesses. One such recommendation is to encourage regional spectrum harmonisation in the 700MHz spectrum band, to ensure that equipment produced for that spectrum band — most likely for long-term evolution (LTE) "4G" devices — could be mass produced, and reduce the cost for suppliers and — ultimately — consumers.

Microsoft was one of only half a dozen publicly published submissions by technology companies to the inquiry. The committee has so far published 69 submissions, with an additional three marked as being confidential.

Submissions are now closed. It is expected that there will be a number of public and private hearings for the inquiry. Apple has reportedly arranged a private meeting with the committee today; however, the company had not confirmed this to ZDNet Australia at the time of writing.