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More nonsense re GST on overseas purchases

The Herald reports:

Nearly 40 per cent of New Zealanders believe GST should be charged on all purchases made on foreign shopping websites, a survey has shown. …

A Herald-DigiPoll survey this month found that almost 55 per cent of the 750 New Zealanders polled had bought goods from foreign websites.

Of those surveyed, 53 per cent said the $400 exemption should not be removed as the tax would be too inconvenient to collect.

Surprisingly, just under 40 per cent – 38.5% – agreed with the view of the Retailers Association that the 15 per cent GST should be applied to all overseas online purchases to level the playing field for local retailers.

This is like polling people on whether they would like more sunshine. You can want it, but it doesn’t mean it will happen.

Unless overseas companies decide to volunteer to collect tax for the NZ Government, then the only way you can apply GST to all purchases made on those sites is to have Customs impound every single letter and parcel sent from overseas, open it, assess its value, invoice you for the GST, and refuse to hand it over until you pay the GST. It would cost the Government hundreds of millions of dollars and piss off around two million or more NZers who would find that they no longer get mail from overseas delivered to them.

Labour Party revenue spokesman David Clark said the Government “needs to explain to New Zealand businesses why they should be disadvantaged by having GST collected when overseas business don’t face that challenge”.

“It seems it would be pretty simple to speak with Amazon and other suppliers to ask them to collect GST since they collect, as I understand it, sales taxes for individual states in the US. If that’s true, then it’s obviously an ideological decision from the Government not to collect it.”

David Clark is a smart guy, but he sounds like a moron when he speaks such tripe. Amazon is a US company and obliged to collect tax for the US Government from US citizens. It is not a NZ company and the NZ Government has no power to force it to collect GST for us.

To say that Amazon not charging GST to NZ customers is because of an ideological decision of the NZ Government is one of the most patently false and stupid things a NZ politician has said this year.  Perhaps a journalist could ask David Clark if he will guarantee that under a Labour Government, Amazon would collect GST for the NZ Government?

Political commentator David Farrar posts at Kiwiblog.

Comments and questions
37

Amazon already does collect GST with their "Import Fees Deposit" scheme, although this is more to streamline the customs process for their customers rather than help the NZ Government.

Well said Mr Farrar.
Moron is an apt term fully justified in the context of this subject.
What is it about this lust for more tax? The world and how it trades is a changing place and business folk had better get with the trend or fail. History is littered with Arkwright and Granville types who stocked up on candles and fought the advent of electricity.
If Mr Clark is bereft of any sensible ideas how about abandoning gst completely and implementing a financial transaction tax via the banks? On second thoughts maybe not.

GST added to most Amazon orders will still make them cheaper than buying the goods here. It's a fallacy to think adding it to online overseas purchases levels any playing field. Retailers collect GST on behalf of the government. They don't keep it. They can also claim back any they are charged when they purchase their overseas stock. The issue isn't GST, it's about removing competition, just like supermarkets did to small retailers 40 odd years ago. It's called progress. Adapt or die.

Adapt or die. Spot on!

Yes, the NZ retailer does collect GST for the Guvmint, but I as a customer still pay it. Logically, a retailer importing a container-load of a good would pay less per unit than I as an individual would on buying one. However the NZ retailer also has to cover his rent, his wage-bill, and a bit extra so as to feed his wife and children.

The articles statement "38.5% agreed with the view of the Retailers Association that the 15 per cent GST should be applied to all overseas online purchases"; does that mean that 61.5% of those surveyed or a clear majority didn't?

No, because of the ~61% remaining, there will be a number that are in the undecided category, in other words either don't have a preference either way, or haven't yet decided which side to go with

In many (if not most) cases, collecting 15% GST simply would not level the playing field. The cost of some products in New Zealand is, for example, around double the (exchange rate adjusted) price of the same item overseas. Additionally, some New Zealand sites charge $10, $12 or more just to send, for example, a small $4 item (within the same island) while the same item can sometimes be imported for around $2 with no charge for international postage.

There is something seriously awry with NZ retailing. For instance, a 'Weber Smokey Joe' portable kettle BBQ can be purchased by Americans, on Amazon, for USD 29.00 (delivered). While, here in good ol' Godzone (and only God knows why it's called, such), the damn thing retails for $139.

I agree that charging GST on overseas purchases on line is no disincentive to using that method. I bought German shoes in Europe for the equivalent of NZ$70. Here the same shoes cost $245.

Most contributors seem to miss the point. Most retail goods are imported anyway. The reason our retailers have to charge more is the higher costs of sale, which include shop rentals, staff wages, utility charges and GST.

It is true businesses recover an amount of GST, however this may not be alot and it is a cost that overseas online retailers do not have to bear.

The local retailers employ locals, and without them there would be less jobs locally. While I'm not much of a shopper myself, without local shops our towns and cities would become ghost towns. A look at rural town NZ will give you an idea of whats potentially ahead.

We as citizens need to consider the wider effects of people not paying tax for the social wellbeing of the wider community. Without tax payment, there would be more crime, poorer health and education. Third world status people. GST on overseas purchases would be a good start, followed by a financial transactions tax to capture people and businesses that don't pay their fair share.

Richard, could you elaborate on your comment about paying a "Fair Share". Since nearly 60% pay a nett contribution of nothing and 17% pay nearly all the tax,I would be interested about your version of fair.

Well said,

I am one of those 17% that pay the taxes, because I earn more than average.

If you earn obscene money, it should be taxed appropriately. In the majority of cases, the reason people get paid a high hourly rate is because they have employees/contractors below them on minimum wage.

Surely, a living age should be the minimum wage! If you're in business you'll know this will translate into either a lower profit and lower pay for management.

Case in point. There are a large number of resthome workers earning $13.75 per hour, while lawyers and bankers regularly earn more than $400 per hour plus.

Ask yourself who is of more value to society?

Clearly, society has an imbalance in pay levels, While some people explain this away as a byproduct of freemarket, freemarket doesnt exist. There are subsidies and government intervention everywhere you look.

The way the present system is set up, if I collectively earn 10% of the nations wealth, it would seem fair to pay 10% of its taxes. How else is the nation to fund its infrastructure and greater wellbeing?

Society should focus on the bigger picture, rather than short term windfalls that are clearly unsustainable.

I think a lot of emotion is involved in this issue of gst on internet overseas purchases plus little attention to reality in regards to this new world we live in today.

First up we are not never going to have retail shops or physical retailers. It just will not happen.

Agree there could well be less of them.

In regards to small rural towns and changes. Can't argue with the fact changes to the economy over the last 50 years in particular has created many many changes. But having spent many years of my life involved in small rural towns I have observed that the people within these small towns who embrace change and progress, have a can and will do attitude and actually get off their butts to do something about it, have reinvented some wonderful new trends and activities to their town.

So I have to agree with your suggestion that small rural towns in general are going down hill or becoming ghost towns.

Look at Darfield and similar towns in Canterbury and the Synlait and Fonterra factories and creating hundreds of jobs..

All very well going on about tax on imorted goods bought over the internet, but collecting it is quite another story.

Change is inevitable. Be excited by it. , Accept it as part of growing. Run with it and use ones creative juices to reinvent oneself and the town. Go forward looking through the front windscreen and not the rear vision mirror.

We maybe a very small nation but we are now through technology part of the whole world- accept it.

Finally I think this arguement is not really about tax. That is just an excuse for retailers to cover their own inadequacies and acceptance of progress.

I don't hear Rod Duke of Briscoes and Rebel sports whom I think is the most successful retailer in Australasia complaining.

My guess he is to busy focused on his own business growing the profits, looking after his shareholders and making money.

I suggest other retailers should take a leaf out of his book.

As a buyer on the internet the gst arguement and if introduced will not affect my purchasing one iota.

Internet buying is much more than just price but so many complaining retailers just can't seem to get their heads out of the sand long enough to realise this. Diansours..

I like your positive attitiude.

Businesses do have to evolve, and yes their are some that wont and will not survive.

It are right in saying lets embrace the changes, and spend more time with family and friends. Sounds like a excellent new years resolution to me.

What margins do NZ retailers actually work on? We see stores like Briscoes etc have large discount sales week after week, and still report significant profits at years end. Why should we pay these vultures more when we can but cheaper online?

Richard ( above ) says most retail goods are imported. NZ is not unique in that. Many countries import their consumer goods from China and other Asian countries. Goods shipped from China to the UK or Us, then onward to NZ via an online purchase are often cheaper than the same item travelling direct front China to NZ . How does that work?

GST should be charged! The reason is if it isn't, it has to be raised from somewhere else - either higher GST on NZ bought products or income tax.

Retailers will still face exactly the same issue they face now as they are relying on high margins, due to lower turnover and higher overheads. Online shops focus on low margin, high turnover and very low overheads.

The issue is there is no simple way to collect it. Too expensive to do at the border and if the Govt makes Amazon collect it, we will just use NZPosts US redirection service to avoid it or buy from one of the many Asian shops which will put the declared value at $5 regardless of the actual cost.

Targeting credit card companies must be the 'best' option as they should have the details on the physical location of the card, services performed etc.

The problem consumers face in NZ is a serious lack of competition. We only have two of anything, which is different to the UK, Europe and the US, where true competition drives down prices.
I run a small studio and was looking at a microphone that cost $1400 here. my friend in the UK can buy it for £299 ($600).
One reason for the huge difference is that the local retailer probably sits on such a microphone for months or a year before selling it.
NZ retailers do not enjoy the same turnover as their counterparts abroad and consumers pay the price...

I agree Stephen, I bought a Les Paul Gold top online from a retail shop in the USA, had it shipped to NZ by Fedex in 4-days, paid customs fees and GST. The total cost was NZ$1700. I priced the exact same guitar here through a retailer and guess what, the prices was $4,600. How is it that the price can be so different when the place I bought it from in the USA was an actual retail shop with premises, staff, rent to pay, electricity, insurance, rates etc operating identically to a retail shop in NZ but able to offer me the guitar at 37% of the cost of the NZ retailer?

Would you be happy to provide that service to other people for no reward?
What if they ordered and changed their minds?
What if the goods arrived and were faulty? What if that happened after you had passed them on to the buyer?
What if not many people wanted to buy those flash guitars and so your goodwill with your suppliers began to run a bit thirsty and sale related services started attracting nominal charges?
What if lots of people wanted to come to your house and kick your tires without buying anything?
What if the government insisted if there were problems with any guitars you brought in you had to guarantee them?
What if there is a dispute and freight is heaps of coffees each way, back and forth while you sort it out while your caffeine 'water' table plummets?
Check the box - are you sure you didnt buy Les Miserable?

And so your argument is that its justified for a NZ retailer to charge a 63% premium based on the remote possibility that one or all of the events you outlined might occur with an international online purchase. With that kind of logic you can only be a retailer.

So many what ifs and negativity.

I wonder how you ever make a decision living in fear of what ifs - if that is how you apply your decision making process.

I find it quite sad thinking.

Some what ifs on decisions are essential but so many on this topic?

The reality is that most of the what ifs you raise mostly never happen in my experience and if on the very odd occassion something does happen then It has been fixed to my satisfaction promptly and with courtesy.

I don't buy from Nigeria or first without checking the seller.
Simple, easy, quick and wonderful service and follow up. Try it you might surprise yourself.

Retailers would love GST to be applied to privately imported goods. This would help remove competition. And yes, it is far cheaper to buy goods from overseas. But GST or no GST is the wrong question. We are already over taxed. GST is a costly tax to administer, both from a business perspective and a govt cost to the taxpayer.

Put GST on imports and people will find a way to bring in things without declaring. Next there will be strip searches at the airport to check clothes labels so that they can charge you GST. Or mandatory opening of parcels to check the labels or contents.

GST is a tax on spending. It should never have been introduced. Much fairer would be to remove GST and income tax and replace it with turnover tax. Shop prices would drop; consumers would have more money in their pocket. Overseas companies that turn over billions but pay no tax would now shoulder their share of the tax burden, instead of funneling (on paper) all profit to the country of the lowest tax rate.

As a further note, I buy from overseas, but it is usually not for price. Typically it is for availability and speed of purchase. Like most people, once I find something I want, say books or DVDs on Amazon, I enjoy being able to order the goods and marvel at the speedy delivery in just a few days. The same item ordered through a retailer would take weeks. Yet if on the day of my wanting it, I would probably have been happy to pay extra to go and buy it off the shelf locally.

I don't buy the idea that it needs to take weeks. With electronics items from some online retailers across the ditch (Oz) I can place an order 4pm NZ time, and it will be on my doorstep 9am NZ time the next day.

Retailers need to adapt to the changing marketplace.

Exactly..

A (financial) transaction tax. The only reason government(s) are not introducing it is the power of the banks.

The only businesses that dont pay GST, and you wonder why. For this reason, GST is not a fair tax. Banks, in my opinion, do not pay enough tax as it is. A transaction tax would sort this.

Wonder why this transaction tax isnt talked of in main stream media? It may have something to do with their bank borrowings.

Your claims are incorrect. No business pays GST. They simply pass it on to the ultimate consumer in the price of the goods or services they sell. There is no basis for your claim that banks do not pay enough tax. They pay the same rate of tax on their profits as any other business. A financial transactions tax would be passed on to bank consumers and borrowers just like GST would be.

Lindsay,

With respect, you are obviously not in business.

GST works like this. As a business, I purchase a good for $65 GST inclusive, with the GST component being $15 of that. I then sell it on for $130 GST inclusive, with the GST component being $30 of that. While I may have some costs along the way, the government picks up the GST profit of $30. In this case, an additional tax of 11.53% on the gross price. Tax on business profit would be in addition.

So business does pay GST.

The only businesses that dont, or should I say pay very little, is the banks.

While a financial transaction tax could be past onto the consumers, its the same for everyone and a much fairer means of collecting tax.

The best thing about the financial transaction tax is it would remove alot of short term speculation from the economy. Less pronounced economic boom and bust cycles. Easier for exporters.

If you havent worked it out, money is a private business; controlled by the global elite.

Lets get rid of the speculators, and create a fairer tax system!!

Retailers used to take the risk of importing goods, holding them and selling them. In this day and age, there is simply no need for many retailers other than as showrooms. Retail is a leach industry, who cares if a few small retailers die, maybe the workers can go work for industries earning export dollars rather than leaching as middle men. Why any need to protect retailers?

retailers need to work smarter and offer consumers a reason to frequent their shop, i would never shop in the CBD due to the ridiculous cost to park my car and the overcharging for coffee and food let alone the items in the shop maybe retailers can lobby Wilson parking for free parking with a proof of purchase.

A comment on the margins of retailers. Like most businesses they will have to mark up 315%, 100 for capital (real estate), 100 for product stock, 100 for staff, 15 for profit. There is no rip off here, this is simply the cost of operating in a physical model.

Online, nearly all costs are cut to 10% of the comparable physical cost.

There are tons of people that will still buy retail, but simply not for goods where it is not necessary, which are pretty much the goods you find on Amazon and the local E-Tailers. The Warehouse for example does this very well, with online being just one more interchangeable sales channel, that saves money for both parties.

I for one wouldn't mind StLukes Westfield being raized and replaced with a park and 6 Cafes doted around it.

So you are saying it is not a rip-off when Americans can buy the same book that would retail in a New Zealand store for maybe $25-35NZD for $3.5-7NZD in a PHYSICAL STORE! That for alot of electronic things you are looking at a 30%+ premium to buy from the New Zealand store, but the premium is far less on things which do not have the GST! (Coincidince the 'costs' are only there when we can't just import cheaply).

Is there something special about New Zealand stores, do we need twice as many shelves to hold an item, twice as many workers? What is so special, are they using special lightbulbs that eat $100 bills? Ofcourse prices will go up if competition is reduced! Hell there were almost no christmas sales on for electronics and books as it is!

"Labour Party spokesman" + "Moronic statement" = no surprises for anyone.

...and for more of the same, NZ's still awaits any details on their "Power policy" that will ensure household savings of between $220-330p.a.

It has only been month's and month's since they announced it, but will any details ever be released?

The problem NZ retailers face is the distributors or wholesales that have licenses or agreements to import product from the manufactures and then sell to the Nz retailers. Distributors sell themselves to overseas manufactures by promising to take care of local warehousing, distribution and marketing. For some products very little value is offered when considering the margin they take. They (distributors) also the sell to retailers on 30 day terms. The retailer now with the short end of the stick having to carry stock, wait for the punter to buy, and the reduce prices in their sales in order to move it on. And all the time they probably could have imported the goods themselves at less than buying from their local distributor.

Retailers need to bulk buy direct, offset the shipping. Only then can they compete with online retailers. Even with the GST now added the cost is more comparable. Even if now on 20% more than buying online! the purchase still gets ease of local warranty etc.

Overseas shipping of parcels is going to continue to get cheaper as competition grows. (Something NZ post should has also been looking at).

I'm a regular purchaser online. However as a rule if it's only 20% more locally! I'll go local.

Wake up NZ retailers and buy your goods direct. By pass the distributors. Or combine forces with other retailers to get better buying power. Cut out the double dipping, your the only ones that will loose out.

GST: means Goods, Services,
tax

If someone buys a widget from a foreign country via a retail outlet there and that good is posted, couriered or wired then where have the goods/and or services been handled in NZ? (other than the courier driver who is making a good living as a result of this increase in trade) not one of the other individuals has been supported by the taxpayer effort via health, education and any other policy delivery mechanism. To tax it would therefore be ridiculous as well as unjust.
I have also noticed a huge markup in prices here vis a via abroad and whereas 25% would be acceptable (maybe) double the price is not.

Hard not to agree with you Neil. It is not rocket science for them to do as you suggest.

Moron is about right! Though the point he makes is perhaps quite valid after all I don't think anyone could reasonably argue that the current status quo is unfair on local retailers.

What is possibly more relevant in this discussion is whether GST should be charged at all given the almost impossibility to quickly and efficiently collect such tax on imports. Could it be time to abandon GST altogether and look for other ways to make up the tax shortfall?