Kiwis to be hit with tax on online purchases

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Forums › Finance and wealth management › Kiwis to be hit with tax on online purchases

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#1903995 19-Nov-2017 12:38

richms:

So they may drop the price and then edge it back up to the most profitable amount which is no different when most of their consumers have had no choice but to pay the GST.

Yes, no doubt that can and would happen to a greater or lesser level. Squeeze extra margin on the sly, which is normal in retail anyway. You would rely on competition to manage that. Plus the Fair Go's of this world would be rubbing their hands for a big story.

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#1903998 19-Nov-2017 12:54

tdgeek:

Pak N Save is cheaper, due I assume to it being a basic environment whereas many supermarkets upgrade to the latest kool aid look. My point is I do not see retailers keeping the same prices once GST is removed from some items. Your Pay N Save theory is correct, but people know why its cheaper. If GST was removed from some staples, that applies to all supermarkets. Should bananas be $4 a kilo one day, and $4 a kilo the next day which is the new GST free price. Im sure that would be noticed by many.

You mean like petrol where the margins have been increasing ?

Or how they charge something like 10c a litre more so they can give you 6c back (4c used for overheads + profit)

How about realestate, where costs have not changed much over the years but the profits OMG.

How about the "trick" where by a widget101a at retailer one vs widget101b at retailer 2 vary in price but its only the colour of the clip that is different. But because of this you can not claim the 15% back as they "promise"

I also love the 50% off the 2nd (lower priced) item vs 25% discount. Buy 1 item at $50 and the 2nd at $10 you get $5 discount, 25% would get you $15.

How about supermarkets show how much things are per 50g vs 100g/kg so its looks cheaper.

Consumables like batteries typically have well over 100% profit on them, jewellery can have over 1000% markup, they don't sell this stuff at 90% off at a loss.

Milk, well about 50% of the purchase cost is by the supermarket, the farmer and fontera make up the other 50%.

And the margins at supermarkets have also been rising over the years too.

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#1904007 19-Nov-2017 13:07

tdgeek:

Geektastic:

Shame we can't apply the same flat rate to income tax...

Very easy

The poor pay less % the rich pay more, so easy to find the rate that gives the Govt the same revenue. What that will do though is reduce tax paid for the rich and increase on the poor.

Sounds good to me.

JimmyH

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#1904240 19-Nov-2017 22:03

tdgeek:

Exempting some food from GST is about basics. Milk, meat, veggies, fruit, not $50 steaks or Twisties. I see your point, but lets be sensible. Basics.

Define basic? And I don't mean using common sense, I mean legally. Because that is what you will have to do if you base the tax system on such a criterion. And I pretty guarantee the lawyers will litigate boundary cases endlessly.

You will, for instance, need a watertight definition of when a potato ceases to be a "basic" food - it it when it is washed, when it is sliced, when the slices are dipped into boiling oil, or when it is labelled as chips? What about instant mashed potato?
How do you define fish (say flounder) as a basic food in a way that stops lobster, smoked salmon, or caviar being similarly defined? What about frozen fish? What about tinned fish? You could quite easily wind up taxing $10/kg frozen hoki while exempting $150/kg imported fresh spider crab?
To take your example, how do you apply GST to gravy beef and/or $15/kg rump steak, but not the $50 steak you are worried about. What about $20 steak? $30 steak? Is $49.99 steak OK but not $50 steak? Will tax inspectors have to do sophisticated testing to prove what a particular cut of beef is to a judicial standard?

tdgeek:

Exempting some food from GST is about basics. Milk, meat, veggies, fruit, not $50 steaks or Twisties. I see your point, but lets be sensible. Basics.

This is basic economics. The price impact will depend on how competitive the market is, the elasticity of demand, and the elasticity of supply for the product in question. The price won't fall by the full amount of the GST however - as the producer/distributor will still be paying GST on all the inputs (fertiliser, harvesting, transport) in the supply chain, which they can no longer deduct from the GST on the selling price.

cadman:

For what purpose is tax collected?

Ummm... to fund government spending. Things like health, roads, education, law enforcement, and pensions.

Are you claiming that you don't think any of these should be provided?

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#1904403 20-Nov-2017 11:28

JimmyH

To take your example, how do you apply GST to gravy beef and/or $15/kg rump steak, but not the $50 steak you are worried about. What about $20 steak? $30 steak? Is $49.99 steak OK but not $50 steak? Will tax inspectors have to do sophisticated testing to prove what a particular cut of beef is to a judicial standard?

GST works because there are no loopholes
Start making exceptions & we get loopholes and idiotic rules
GST on sugary foods, then we have to include fruit & 100% juice .
No GST on steak, what about mince, then pies, then premade pasta foods with mince, then tinned foods . Its a slippery slope

Just look at how well tax excemptions work on income & company tax. You'll have lawyers looking for loopholes
And tax free food wont have much effect on actual prices , long term. As above, food prices a set by market value , taking the tax off
may have no effect on pricing at all.

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#1904405 20-Nov-2017 11:33

sir1963:

And the margins at supermarkets have also been rising over the years too.

Gross margins in supermarkets right now are at some of the lowest levels they've ever been due to the competition.

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#1904527 20-Nov-2017 13:08

JimmyH:

tdgeek:

Exempting some food from GST is about basics. Milk, meat, veggies, fruit, not $50 steaks or Twisties. I see your point, but lets be sensible. Basics.

Define basic? And I don't mean using common sense, I mean legally. Because that is what you will have to do if you base the tax system on such a criterion. And I pretty guarantee the lawyers will litigate boundary cases endlessly.

You will, for instance, need a watertight definition of when a potato ceases to be a "basic" food - it it when it is washed, when it is sliced, when the slices are dipped into boiling oil, or when it is labelled as chips? What about instant mashed potato?
How do you define fish (say flounder) as a basic food in a way that stops lobster, smoked salmon, or caviar being similarly defined? What about frozen fish? What about tinned fish? You could quite easily wind up taxing $10/kg frozen hoki while exempting $150/kg imported fresh spider crab?
To take your example, how do you apply GST to gravy beef and/or $15/kg rump steak, but not the $50 steak you are worried about. What about $20 steak? $30 steak? Is $49.99 steak OK but not $50 steak? Will tax inspectors have to do sophisticated testing to prove what a particular cut of beef is to a judicial standard?
tdgeek:

Exempting some food from GST is about basics. Milk, meat, veggies, fruit, not $50 steaks or Twisties. I see your point, but lets be sensible. Basics.

This is basic economics. The price impact will depend on how competitive the market is, the elasticity of demand, and the elasticity of supply for the product in question. The price won't fall by the full amount of the GST however - as the producer/distributor will still be paying GST on all the inputs (fertiliser, harvesting, transport) in the supply chain, which they can no longer deduct from the GST on the selling price.

cadman:

For what purpose is tax collected?

Ummm... to fund government spending. Things like health, roads, education, law enforcement, and pensions.

Are you claiming that you don't think any of these should be provided?

OK, I wish I hadn't mistakenly referred to someone elses $50 steak. Yes, there are great areas and thats probably why we dont have this idea. Natural meat, whether that be rump, porterhouse, mince. Not sausage rolls or pies. Ham, even those slices in a plastic container, but not whaddya call the thin processed things? Fish, fresh, frozen, tinned, but not fish cakes, or highly processed fish. I think some frozen crumbed fillets are proper fish meat. But yes, there would be many products in the maybe yes, maybe no pile

"as the producer/distributor will still be paying GST on all the inputs (fertiliser, harvesting, transport) in the supply chain, which they can no longer deduct from the GST on the selling price."

Thats incorrect. Inputs will continue to be on a GST return along with other inputs and other outputs. A mainly fresh food retailer will get tax credits. GST is not a cost or expense, its an asset and liability, though usually represented in the Balance Sheet as a Liability. Its ONLY funds we pay and get back or collect and pay to the Govt. A P+L Account doesnt show GST, the P+L is only Income and Expenses, GST is not either. It dense affect the margin or cost of raw materials, or the selling price as represented in the financial accounts.

cadman

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#1904601 20-Nov-2017 13:21

JimmyH:

The price won't fall by the full amount of the GST however - as the producer/distributor will still be paying GST on all the inputs (fertiliser, harvesting, transport) in the supply chain, which they can no longer deduct from the GST on the selling price.

That's not the reason the price point won't change and not how GST works. Only the consumer pays GST - suppliers up the chain still get the GST back on goods they produce for export which is zero-rated to their customers.

JimmyH:

cadman:

For what purpose is tax collected?

Ummm... to fund government spending. Things like health, roads, education, law enforcement, and pensions.

Are you claiming that you don't think any of these should be provided?

I'm saying we get very poor value for what we pay.

JimmyH

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#1904999 21-Nov-2017 09:24

tdgeek:

OK, I wish I hadn't mistakenly referred to someone elses $50 steak. Yes, there are great areas and thats probably why we dont have this idea. Natural meat, whether that be rump, porterhouse, mince. Not sausage rolls or pies. Ham, even those slices in a plastic container, but not whaddya call the thin processed things? Fish, fresh, frozen, tinned, but not fish cakes, or highly processed fish. I think some frozen crumbed fillets are proper fish meat. But yes, there would be many products in the maybe yes, maybe no pile

I look forward to seeing how you can write that into clear and enforcable legislation, that won't result in endless litigation over boundary cases and an expensive enforcement mess for the IRD.

Plus, on your definition, a poor family in Otara that spends $10 on a family size mince pie or some fish cakes from Pak n' Save for dinner will have to pay GST. A multi-millionaire who pays $200/kg for an expensive bit of wagyu eye fillet won't.

tdgeek

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#1905008 21-Nov-2017 09:49

Yes, thats right on both counts. And why it will never happen. As regards the pies and fancy steak, yes that right. No different to a poor person and a rich person buying GST goods, its a far higher impact on the poor person

My premise was if healthier food was cheaper, lower income people might buy more healthy natural food and cook it, rather than fat and salt laden processed food

JimmyH

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#1905587 22-Nov-2017 09:05

Casting my mind back to when I was a student, it also occurs to me that this system could be an interesting magnet for hackers - and doing so might be seen as an excellent capping day stunt.

I recall that a similar system that puts alerts onto TV and radio broadcasts was hacked in Montana in 2013, and zombie apocalypse messages such as "Civil authorities in your area have reported that the bodies of the dead are rising from their graves" were sent out.

Which I would usually applaud as a funny gag. But not if it woke me at 2am.

I hope they have appropriately hardened the system.

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#1905606 22-Nov-2017 09:51

JimmyH:

Casting my mind back to when I was a student, it also occurs to me that this system could be an interesting magnet for hackers - and doing so might be seen as an excellent capping day stunt.

I recall that a similar system that puts alerts onto TV and radio broadcasts was hacked in Montana in 2013, and zombie apocalypse messages such as "Civil authorities in your area have reported that the bodies of the dead are rising from their graves" were sent out.

Which I would usually applaud as a funny gag. But not if it woke me at 2am.

I hope they have appropriately hardened the system.

Not sure how much of a fun hack it would be applying GST to local produce… And it probably wouldn't wake most people at 2am!

JimmyH

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#1906078 22-Nov-2017 22:41

Sorry, I meant to be replying to a different thread, about the Civil Defence emergency alert system.

Not sure what happened there..... my bad

Rikkitic

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#1907699 25-Nov-2017 16:03

I just had a brilliant idea. No doubt it is fatally flawed in some way that hasn't occurred to me, but I will throw it out here anyway.

Whenever a parcel arrives for someone from overseas, it has to go through Customs so they must have a record of the addressee. The parcel must have a declared value, whether that is correct or not. Sometimes Customs checks this, often not, but it still must pass through their hands.

If the total value of the parcel including shipping is believed to be less than $400, no GST is collected. The matter ends there.

But why should it? Collecting GST on small items might not be worth the cost, but it wouldn't cost a lot to maintain a database of imported items over a year, and add up the total for any given address (or recipient name, or whatever). If the end of year total exceeds a certain value, the return would exceed the collection cost and a GST invoice could then be posted out. This cumulative GST approach might require a law change, but I'm sure it could be done.

And yes, people could get around it by using the addresses of friends or whatever, but how often is that likely to occur? So why not keep a tally of those small individual purchases over a year instead of just looking at them one by one? If the total still falls under the threshold, no GST gets collected, otherwise it does. Would this not be better than the current situation?

Plesse igmore amd axxept applogies in adbance fir anu typos

richms

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#1907705 25-Nov-2017 16:35

Rikkitic:

And yes, people could get around it by using the addresses of friends or whatever, but how often is that likely to occur? So why not keep a tally of those small individual purchases over a year instead of just looking at them one by one? If the total still falls under the threshold, no GST gets collected, otherwise it does. Would this not be better than the current situation?

I really dont see why I should be paying GST on the unsolicited aliexpress dildo deliveries or other stupid crap people send as a joke.

Richard rich.ms

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