Banks wouldn't want to be involved in attempting to collect GST on goods bought overseas for less than $400 because doing so would be "incredibly complex", Kirk Hope the CEO of bank lobby group the New Zealand Bankers' Association (NZBA) says.
Hope told interest.co.nz that although he had some sympathy with the New Zealand Retailers' Association argument about a level playing field, banks weren't keen on being involved. His comments come after it emerged that three government departments have set up a joint working party to see whether GST could be levied on overseas purchases worth less than $400.
"We wouldn't want to be involved in the collection of it because it's very complex both to implement and administratively," Hope said.
"And I think (Customs Minister Maurice) Williamson has pointed out that in fact no other jurisdictions have figured out how to collect GST on online transactions because it's not as easy as the Retailers' Association would have you believe."
He also noted New Zealand's 'low threshold" in comparison to Australia's A$1,000 one.
Hope also said a problem for banks would be not actually knowing where their customers were.
"A customer may be in a foreign jurisdiction on holiday. We don't know where they physically are so if the transaction is booked on their credit card in a foreign jurisdiction, are they there physically? Are they holidaying or have they just brought something from that jurisdiction?"
"The Government knows there'd be very little actual collect in comparison to the cost and complexity of administering it," Hope added.
Separately, Alfred Naffah, Mastercard's New Zealand manager, has labelled the idea "not do-able" from Mastercard's perspective because card issuers don't have a direct relationship with either shoppers or retailers.
You can read a paper from the NZ Retailers' Association on this topic here.
25 Comments
Maybe the solution is to do away with GST and replace it with a tax on financial transactions.
This could be automated and would capture almost all transactions except cash deals which would no doubt grow in number but are already used to evade GST and income tax. While we are at it lets do away with income tax. This would reduce compliance costs hugely (bad news for accountants) Other positive effects would be: the parasitical financial sector would be paying their share as well as being resonsible for tax collection, probably a reduction in speculation on our currency and taxation on saving could be removed
Apple: Agreed. But what about a FTT on foreign transactions. And only on the outwards flow - leaving GST as it is. I have some sympathy with your view on income tax. But not discussing it here.
FFT on outwards transactions would not be 15% obviously. Maybe 2-4%. Would have multiple effects.
1. Would be a tarrif on imports effectively. Thus promoting New Zealand activity.
2. Would stop the financial traders in currency dead. Volumes would go down to the essentials of goods and services.
3. To be effective and simple would have to be universal on all flow outwards.
Agree AppleTree. 5% FTT on every transaction entering or leaving an account. No income tax, company tax, RWT, fringe benefits, GST, depreciation.... just a continual bank collected clipping of the ticket. No waiting or delays. No tax returns or paper work. All tax collected in real time straight from the banks computers to the government coffers. Tick, tick, tick.
- Foreign online and local retailers would be treated equally.
- Would act as a stamp duty on property transactions too. Buyer and seller to pay 5% of property value at time of transaction. Ditto shares and all other financial instruments. No tax on capital gains or dividends, only at point of sale. Level playing field for all investments.
- Would act as a payroll tax. Wages clipped at 5% on leaving employers account and 5% on entering employees account. 5% on money transferred overseas.
- Unavoidable with no exemptions and no administration costs for businesses. Level playing field for SME's and corporates. No advantage from having high powered accountants and lawyers.
- IRD to shrink to a few people overseeing the bank computers.
- Tax lawyers would disappear.
- Would make short term currency and share speculation unprofitable and get the jackals out of the NZD so establishing a "real" value based on trade alone.
- Stop hot money entering and leaving the economy at will. Only long term foreign investors would bother. They would pay no tax while here but 5% on entry/investment and 5% on repatriation of profits or selling and leaving.
- The more you earn and spend, the more you pay. No RWT, you only pay when you spend and money leaves your account
Get IRD to be tougher with enforcing the payment of GST on the big players, eg finance companies and other companies who will liquidate themselves, but still live in their expensive trust owned houses, drive flash cars etc. And leave the little guys alone, cos the cost of getting GST on their small purchases, probably will cost them more, than what they receive in.
Agreed - if anything they need to INCREASE the dollar threshold to match the AU threshold. For the small importer, the cost of importing goods (above the $400 boundary) is ridiculous.
I have a good friend running a small online business who recently placed a small "top-up" order from their Australian distributor of European goods. The cost of the parcel was NZ$480.
The parcel was seized by customs, requiring the services of a customs broker to get it subsequently released. The total cost of the various import duties (and they are legion), including GST, was nearly NZ$300, enough to wipe out any potential profit associated with that stock.
It also took nearly 2 weeks to actually get the goods out of Customs on the NZ side. Ridiculous! The beauracracy being applied to those little packages is a massive waste of time and money.
Sure, run a sniffer dog over them and do some bio-control, but why bother with the rest of the nonsense?
How about NZ retailers start offering their goods (and sourcing more options and varying products) at RESONABLE prices. If people are buying items off shore and paying shipping for under $400.00 doesn't that tell you they are saving enough money to warrant doing so? If you haven't started looking at purchasing over seas I thoroughly encourage you too. Prime example is Mountain Biking/Road cycle equipment, even after shipping you can save 50-60% off purchasing in NZ – some places ship for free to NZ which increases savings.
One thing, NZ retailers seem to pay far more per SqM than overseas retail stores, I think overseas typically pay 11% while NZ pays 14% even 18%. So sure there isnt the volume for wholesale, but there are also heavier costs. The Q is why should we as consumers suffer price gouging throughout the chain.
regards
See my comment above TimfromTaupo - there are plenty of additional costs that retailers here in NZ have to absorb before being able to put a product on the shelf. Even the monthly cost of a physical EFTPOS terminal is ludicrous.
I think when you combine those things with a very small economy, limited economies of scale and consumer trends that are moving away from "bricks & mortar" shopping, the reality is that retail shopping is always going to be expensive in NZ.
An example: I purchase most of my business shirts from Marks & Spencers online now - they regularly do free shipping to NZ for any order, plus their shirts are about a quarter of the price of equivalent shirts being retailed here in NZ.
Am I sabotaging NZ retail? I don't think so. I just can't afford to buy decent shirts here, so I get them elsewhere!
How many times have you gone into a store only to find they order the item "online" and you pay them for the "service"?
No thanks.
Don't forget even online retailers need to have "in stock" or you click away to another joint. It is a revolution for the consumer. Not so much for bricks and morter.
Maybe rethink high rent and overpriced commercial property? Just saying...
Or how many high street retailers no longer hold stock, ie want a small or large "non-standard" shoe size? Or a colour not in stock? well you get told either no we cant it or yes we can order it in for you and that will be full retail plus freight, gee thanks.
"Maybe rethink high rent and overpriced commercial property? Just saying..."
Yep, too true, I think NZ consumers have bee taken for a ride for years and the channels behind like commercial property and large importers in turn had nice fat margins......and all done on debt....
regards
A way will have to be found to collect GST on online purchases or there will be a hole in the tax base a mile wide. It will be the end of GST as a tax. That might be a good thing but it will require increases in Income tax to fund it.
It will be inconvenient and expensive for banks to collect the tax but I bet if there was a law that says they are responsible for paying it whether they collect it or not they would find a way pretty quickly. It has been inconvenient and expensive for traders to collect GST and pay it to the Government for years but they have to do it. Banks collect withholding taxes and insurance companies collect the Fire service Levy. They dont want to but they have to.
Individuals probably will be annoyed at giving up their rort but a fundamental tenet of any tax sysem has to be fairness and it is very unfair the way it is now. Large overseas online sellers often without any physical presence at all can be very cost effective and that is the way of the world. They dont need a 15% leg up as well.
How do you determine when GST is due? if I spend on my CC while abroad I will have paid the local taxes, plus then get hammered for GST? oh boy....
Its not a leg up and you are wrong as there is freight costs to be met.
Most GST will be paid here anyway as many goods cannot be air mailed, eg fuel, food. These are the commodity things, the rest Id suggest is if we are forced to pay GST will help re-inforce retail monopolies here in NZ and nothing more.
eg when I import a $40USD item, Im paying that again in freight, yet the goods here are still more expensive...does not compute. So the NZ arms of the big companies etc charge the full retail on goods because our market is so small there is no real competition.
So what you are really saying is, yes, yes, help reatilers hold their monopolies and screw over us please....let me just grab my ankles...
regards
If overseas suppliers can provide product, service pay the freight and still be cheaper good on them. Just saying they dont need our tax system to help.
The banks and credit card companies will be able to create systems that will identify what transactions should be subject to GST. If they are responsible for the tax they will err on the side of collection but anyone who is charged GST and does not feel they should have been can trot along to IRD or customs and make their case.
The banks are making a fortune out off all these credit card purchases as they get a margin from the sellers and more than likely collect interest on unpaid credit balances on purchasers cards. Up to them to sort this out.
Your point is not well made.If retailers here are not competitive in this on line world they wont survive. If they dont have stock , dont provide service , advice and an overall shopping experience many people will buy on line. Of course they will. However most people, except those chained to their electronic devices and allergic to sun light still like shopping and will pay a bit more for the experience and the opportunity to get what they want immediately. If it is a fair fight the best channel will win. It is not a fair fight at the moment and the GST imbalance is creating a distortion.
The problem the Government is confronting is a different one. They probably dont care too much about the fair fight although they may be interested in protecting jobs in retail and company tax revenue here. The problem they have is a shrinking GST tax take . If this plays out to its logical conclusion they will be looking for Billions of dollars from somewhere.
It always amazes me how far the govt will go to squeeze as much as it can from the little fella.
However if you are a foreigner purchasing a horse at Karaka you don't pay any gst on the purchase provided the horse leaves the country within a certain time frame.
Given that most of our expensive horses are purchased by off shore interests the gst lost must be huge but don't worry the govt will get it back when i purchase my next pair of italian shoes off shore.
GST is the beautiful red herring. In many instances the GST saved is similar to the postal charges. So the purchaser does not buy to save GST. They buy because the choice is dramatically better, the item is not available here, or the overseas retailer offers a greater choice of related items and in most instances the cost of the product is significantly less.
If you take food supplements as an example I usually calculate that the overseas product is 3-5 times cheaper. In some cases it is an identical item to one sold here.
If the car you bought was five times cheaper at an overseas location there would be a national outcry. This tells me that most local retailers are just not competitive and they cannot complain if consumers get smart and vote with their cyber feet.
I suspect many products are imported by retailers and then sold on. Don't forget they can claim back their GST on imports. I have a neighbour who shipped in the components to build his entire house and saved a bundle.
We are just not competitive lets face it!
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