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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#1903535 18-Nov-2017 07:53

rugrat: Maybe GST has passed it's use by date.
Maybe less hassle to tax income as it's earn't rather then spent.
Realise that makes it easier for some to tax dodge, but seems there's lot of costs with trying to put it on imports, and guessing it must be a big amount for them to make such a fuss over it.

Also then won't have to try and get overseas companies to cooperate either.

Edit: People that are saving money do better out of GST, as have more money after income tax, then if use those savings to buy something GST exempt like an existing house or private sale.

There are plusses and minuses with a consumption tax. Savers are better off. A poor person pays the same $ tax on milk as does a wealthy person, a far higher % of income. We also get the tax from proceeds of theft once the stolen goods are sold and money is spent. Food essentials should be GST free. Natural meats, veggies, fruit, milk and any other natural or near natural healthy items.

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#1903547 18-Nov-2017 09:18

tdgeek:

That JK said its a good idea, tell you that it is. The new Govt will bring it in. Why? Its a good idea as stated by JK. This thread shows how complicated it will be to implement. We will see how OZ goes. So why bash the new Govt as they haven't spent the last 18 months working in the issue? Just rant stuff I guess, there is a Politics forum for that.

This is not about a political rant. The previous government said it is a good idea, I say it is a good idea, the current government says it is a good idea - let's just agree that it is a good idea!

You say the new Govt will bring it in and then say "Why?" But it is clear why, that isn't in dispute by most. Let's forget about why.

The only important question is 'how?'. Everything hinges on how this is done.

Are they considering stopping all packages on entry into NZ and charging $50 processing fee + 15%? I sometimes buy cheap stuff from China worth less than $5, this idea would suck and it would be a ridiculous solution. The $400 threshold makes sense because it is silly to stop cheap items and try to charge GST.

Are they considering a 15% charge on all overseas transactions through you bank? This would probably work better except NZers travel overseas a LOT and there would be a lot of applications for rebates due to the goods or services being consumed overseas.

Are they considering contacting all the big players and having them collect 15% at the time of purchase and then passing that money on the NZ Govt? This has a lot of merit and might be the most likely thing to happen, but I can think of many pitfalls. It certainly wouldn't end up being ALL overseas purchases but it would mean a decent amount of extra money being collected. Collecting money from Netflix, Apple, Google & Amazon should not be hard and will result in easy money for the Govt, I have no real problem with that. They aren't going to be able to do anything about the random seller from Ebay that is happy to ship to NZ though, possibly easiest to ignore that one unless the package arrives here with a value of over $400.

I came into this thread concerned about the statement that this government would charge GST on ALL overseas purchases, concerned due to the lack of detail about HOW! To be honest this isn't just my number one concern, it is my ONLY concern. The 'why' is obvious (even for those that don't like a sales tax and wish we didn't have one) but the 'how' is much less cut and dried.

SirHumphreyAppleby

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#1903548 18-Nov-2017 09:20

tdgeek:

Food essentials should be GST free. Natural meats, veggies, fruit, milk and any other natural or near natural healthy items.

This isn't really on topic, so I will keep my comment brief.

Exceptions from GST would greatly increase administrative costs, leading to higher prices. You also end up with different GST rates applied to incoming and outgoing goods once processing is carried out.

Take the widely vilified ingredient sugar for example. That would almost certainly attract GST as a raw ingredient, but incorporated in to a product that meets arbitrary health standards, may be GST exempt. With no GST on the outgoing item, the GST paid for the ingredients would become a real cost, resulting in higher prices.

tdgeek

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#1903549 18-Nov-2017 09:23

MarkH67:

tdgeek:

That JK said its a good idea, tell you that it is. The new Govt will bring it in. Why? Its a good idea as stated by JK. This thread shows how complicated it will be to implement. We will see how OZ goes. So why bash the new Govt as they haven't spent the last 18 months working in the issue? Just rant stuff I guess, there is a Politics forum for that.

This is not about a political rant. The previous government said it is a good idea, I say it is a good idea, the current government says it is a good idea - let's just agree that it is a good idea!

You say the new Govt will bring it in and then say "Why?" But it is clear why, that isn't in dispute by most. Let's forget about why.

The only important question is 'how?'. Everything hinges on how this is done.

Are they considering stopping all packages on entry into NZ and charging $50 processing fee + 15%? I sometimes buy cheap stuff from China worth less than $5, this idea would suck and it would be a ridiculous solution. The $400 threshold makes sense because it is silly to stop cheap items and try to charge GST.

Are they considering a 15% charge on all overseas transactions through you bank? This would probably work better except NZers travel overseas a LOT and there would be a lot of applications for rebates due to the goods or services being consumed overseas.

Are they considering contacting all the big players and having them collect 15% at the time of purchase and then passing that money on the NZ Govt? This has a lot of merit and might be the most likely thing to happen, but I can think of many pitfalls. It certainly wouldn't end up being ALL overseas purchases but it would mean a decent amount of extra money being collected. Collecting money from Netflix, Apple, Google & Amazon should not be hard and will result in easy money for the Govt, I have no real problem with that. They aren't going to be able to do anything about the random seller from Ebay that is happy to ship to NZ though, possibly easiest to ignore that one unless the package arrives here with a value of over $400.

I came into this thread concerned about the statement that this government would charge GST on ALL overseas purchases, concerned due to the lack of detail about HOW! To be honest this isn't just my number one concern, it is my ONLY concern. The 'why' is obvious (even for those that don't like a sales tax and wish we didn't have one) but the 'how' is much less cut and dried.

Its a new issue. No country does it yet, its difficult to get elected, sit down over a burger and nut it all out. Given Australia will go ahead, the best tact is to see how that goes, then everyone will see the real pitfalls and benefits, rather than vague assumptions, which is about all anyone can do right now. Id say the major players will have to register and collect as kiwi companies do, not hard. The smaller ones are an issue, they may find its better to register as landing fees may hurt sales.

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#1903550 18-Nov-2017 09:23

European countries have managed to do this for years so the level of bureaucratic incompetence must be exceptionally high here.

Edit: Sorry, confusing reply. I was responding to the criticism about differing rates of GST for different food items.

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MarkH67

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#1903586 18-Nov-2017 09:48

Rikkitic:

European countries have managed to do this for years so the level of bureaucratic incompetence must be exceptionally high here.

Edit: Sorry, confusing reply. I was responding to the criticism about differing rates of GST for different food items.

And yet when NZ went to introduce GST it sought advice from other countries that already were doing this and got this advice "whatever you do have only one rate and no exceptions". In the UK it is a bit of a nightmare with some things being exempt.

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#1903590 18-Nov-2017 09:55

Rikkitic:

European countries have managed to do this for years so the level of bureaucratic incompetence must be exceptionally high here.

Edit: Sorry, confusing reply. I was responding to the criticism about differing rates of GST for different food items.

Our simple system, a flat 15% almost everywhere, is one of the easiest in the world to administer. It's essentially unencumbered by bureaucracy. Yes, other countries make exceptions, including Australia, but exceptions don't come for free. Even if you can claim the tax back for some items you produce, you've still got to pay your accountants to make that happen, and apportion quantities (including waste) amongst those products. Ultimately, the consumer ends up paying for that, and the officials needed to check such claims are legitimate.

The easiest way to implement a variable sales tax would be to charge GST only on retail. I.e. the retailer alone would be responsible for collecting and returning the tax at different rates on different products. That would work well for supermarkets, but the local fruit shop owner who also sells a few candy bars at the counter is going to struggle to do their taxes.

sbiddle

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#1903599 18-Nov-2017 10:15

I actually see plenty of similarities between the proposal to collect GST on everything and scrapping GST on fresh food. Both may seem the "right" thing to do, but both introduce complexities and costs that mean in reality they don't ever achieve the intended purpose.

The beauty of GST in NZ is that it's an across the board 15% tax. There aren't exemptions or manufacturers who purposely modify products to try and avoid tax (Pringles). This makes managing the system incredibly simple with no complexities.

Likewise collecting GST on every item introduces complexities, the biggest being whether you can collect tax on all low value items without the processing costs exceeding the revenue collected.

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#1903602 18-Nov-2017 10:29

rugrat: Maybe GST has passed it's use by date.
Maybe less hassle to tax income as it's earn't rather then spent.
Realise that makes it easier for some to tax dodge, but seems there's lot of costs with trying to put it on imports, and guessing it must be a big amount for them to make such a fuss over it.

Also then won't have to try and get overseas companies to cooperate either.

Edit: People that are saving money do better out of GST, as have more money after income tax, then if use those savings to buy something GST exempt like an existing house or private sale.

Part of the rationale behind GST was the it taxed a lot of the untaxed income from "cash" jobs.

For example a tradesperson does a job "cash" for $300 vs normal for $350. The government does not receive any taxes from the $300, however with GST when it is spent they will collect GST. Likewise the cash earned though crime when spent paid tax on it.

Lastman

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#1903603 18-Nov-2017 10:37

sir1963:
rugrat: Maybe GST has passed it's use by date.
Maybe less hassle to tax income as it's earn't rather then spent.
Realise that makes it easier for some to tax dodge, but seems there's lot of costs with trying to put it on imports, and guessing it must be a big amount for them to make such a fuss over it.

Also then won't have to try and get overseas companies to cooperate either.

Edit: People that are saving money do better out of GST, as have more money after income tax, then if use those savings to buy something GST exempt like an existing house or private sale.

Part of the rationale behind GST was the it taxed a lot of the untaxed income from "cash" jobs.

For example a tradesperson does a job "cash" for $300 vs normal for $350. The government does not receive any taxes from the $300, however with GST when it is spent they will collect GST. Likewise the cash earned though crime when spent paid tax on it.

I don’t think cash jobs are the reason as cash can just go straight in the pocket with no accounting for GST, if the person is registered, and no tax invoice given.

It is more to create a broader tax base, that was being eroded by people, often the wealthy, hiding or manipulating their income to pay little tax.

richms

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#1903609 18-Nov-2017 10:52

Lastman:

I don’t think cash jobs are the reason as cash can just go straight in the pocket with no accounting for GST, if the person is registered, and no tax invoice given.

It is more to create a broader tax base, that was being eroded by people, often the wealthy, hiding or manipulating their income to pay little tax.

When they go out and buy booze, fuel, new tools etc with that cash, they pay GST, and because they never charged GST since it was a cashie, they have nothing to claim back against it, so they cant claim them as a business expense so the govt gets all that GST, not just the difference on their profit like if they sold their services on a tax invoice. End result is the same GST amount roughly collected for the govt.

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MarkH67

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#1903611 18-Nov-2017 10:56

Lastman:

I don’t think cash jobs are the reason as cash can just go straight in the pocket with no accounting for GST,

I'm pretty sure you have completely missed the point there. The money from cash jobs does not stay in the pocket, it gets spent - what people spend that money on usually has GST.

Anyone that participates in tax avoidance or tax evasion will still contribute to the government when they go to the supermarket and buy their groceries.

But more than that, there is now less under the table jobs than before GST was introduced because pre-GST the top tax rate was a whopping 66% and that certainly incentivises people to try to avoid paying tax. When GST was introduced there was a sizeable drop in income tax rates.

Lastman

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#1903615 18-Nov-2017 11:05

MarkH67:
Lastman:

I don’t think cash jobs are the reason as cash can just go straight in the pocket with no accounting for GST,

I'm pretty sure you have completely missed the point there. The money from cash jobs does not stay in the pocket, it gets spent - what people spend that money on usually has GST.

Anyone that participates in tax avoidance or tax evasion will still contribute to the government when they go to the supermarket and buy their groceries.

But more than that, there is now less under the table jobs than before GST was introduced because pre-GST the top tax rate was a whopping 66% and that certainly incentivises people to try to avoid paying tax. When GST was introduced there was a sizeable drop in income tax rates.

No, I didn’t miss the point, as I said, a broader tax base picks up tax from most forms of commerce that can be eroded by peoplle who arrange their affairs to minimize specific taxes.

MarkH67

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#1903622 18-Nov-2017 12:06

Lastman:

No, I didn’t miss the point, as I said, a broader tax base picks up tax from most forms of commerce that can be eroded by peoplle who arrange their affairs to minimize specific taxes.

Which is what I'm fairly sure was the point that Sir1963 was making with what you had quoted. Hence you missed his point when you said that it wasn't for that reason it was for basically the same reason. The two of you were saying the same thing in different ways, unless I'm wrong and it is me that missed his point.

JimmyH

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#1903674 18-Nov-2017 14:00

Rikkitic:

European countries have managed to do this for years so the level of bureaucratic incompetence must be exceptionally high here.

Edit: Sorry, confusing reply. I was responding to the criticism about differing rates of GST for different food items.

You seem to imply that the Europeans can do it well, so why can't we.

Some European countries do indeed have different rates of their GST equivalent. However, it's a bit of a mess and hugely benefits the lawyers. If you have a spare moment, look up VAT on Cornish Pasties. Or the endless McVitie's legal action over whether their jaffa cakes are cakes or biscuits.Or the court cases over how much potato content Pringles have, which changes their tax status.

Having one rate, with a broad base, and few exemptions is one thing that Treasury and the Lange Government got right.

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