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Options for extending GST to online sales put on hold

The US Federal Reserve's “tapering” announcement will add to local political nervousness over extending GST to items bought offshore.

Local retailers are pushing for the 15% GST to be imposed on items bought from overseas – usually via online shopping. At present items worth less than $400 are exempt.

Local clothing retailer Hallenstein Glasson chief executive Graeme Popplewell delivered a broadside on the issue last week, saying the revolution in the way people now shop means the government cannot afford to avoid this issue much longer without damaging local firms.

Calling the absence of GST on online, offshore sales a “failure of the tax system,” Mr Popplewell says it's a factor in his firm’s recent downgraded profit forecast.

Offsetting that argument is the stark fact adding  GST to such purchases will be seen as a tax grab and will put up prices: something not likely to be overwhelmingly popular.

The expected “tapering” of US stimulatory monetary policy – which was finally flagged yesterday morning – will also be having an impact on political calculations: any tapering is expected to see a drop in the New Zealand exchange rate and a resulting rise in the cost of imports, even without putting a 15% tax on the top.

Inland Revenue was to have released a paper outlining options for the policy by the end of the year: the National Business Review understands nervousness about political blowback - one source says the “political ****storm” the issue has caused in Australia has had a major impact on government thinking – means the issue is on hold until after the election

MORE ON THIS ISSUE IN THE NATIONAL BUSINESS REVIEW PRINT EDITION TODAY.

More by Rob Hosking

Comments and questions
4

We need clarity on the cost of collecting GST. This includesc IRD, the Post Office, Customs, etc costs of monitoring all incoming mail and courier packages, calculating the tax, communicating with people to advise the tax payable, collecting the tax, issuing receipts, storing goods until the tax is paid etc. Or possibly negotiating tax treaties to require retailers overseas to collect GST at the point of sale, or some such mix of processes.

If it costs the taxpayer more to collect the GST than the amount of GST collected, then retailers would be getting a government subsidy to be in business. This is not on.

The CEO of Hallensteins comment about a revolution in the way people shop is idiotic. Move with the times himself. How come USA retail stores are still open and creating sales ? Some of the retailers here are so old fashioned. All my Xmas shopping done on line via Trade Me and overseas. The decision to delay this is a Xmas present in itself

How about we just get rid of GST, which is a regressive tax, and increase income tax so that the amount of the increase balances the amount of the decrease?

Why should anyone have to pay extra tax for consuming a good or service?

Damn right GST should be put on online purchases. Not only does the absence of it in the long term put New Zealand jobs at risk, but why should New Zealanders get a free ride just becuase they are buying from overseas online? What's fair about that? We have schools and hospitals to be paid for. Where do people think the money comes from? The lollipop man floating in ths sky? Or do some New Zealanders think they are too special to be paying their share for our hospitals and schools becuase they use their own computer to buy something online? This is actually an issue about fairness and revenue.