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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#1903795 18-Nov-2017 19:00

JimmyH:

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.

If GST was exempt on fresh veggies and fruit and meat, and many dairy thats simple. It needs to be kept simple.

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MarkH67

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#1903797 18-Nov-2017 19:07

tdgeek:

If GST was exempt on fresh veggies and fruit and meat, and many dairy thats simple. It needs to be kept simple.

The price of fruit and veggies is set by supply and demand, I can elaborate on exactly why if you like.

If you made fruit and veggies exempt from GST the price would still be the same, because supply & demand would be unchanged.

Therefore there is no real advantage to making fruit & veggies exempt from GST.

Then there is the issue of other staples - what about bread? Where exactly does it end.

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#1903804 18-Nov-2017 19:17

MarkH67:

tdgeek:

If GST was exempt on fresh veggies and fruit and meat, and many dairy thats simple. It needs to be kept simple.

The price of fruit and veggies is set by supply and demand, I can elaborate on exactly why if you like.

If you made fruit and veggies exempt from GST the price would still be the same, because supply & demand would be unchanged.

Therefore there is no real advantage to making fruit & veggies exempt from GST.

Then there is the issue of other staples - what about bread? Where exactly does it end.

No, you dont need to explain why, Im not stupid. I am keen to know if say veggies have GST as they do now, and then they dont that the price is unchanged. Supply and demand off course affects prices. So if GST was exempt tomorrow, and supply and demand is unchanged, then consumer prices are unchanged? I dont think so.

If you are a retailer the selling price incl GST is the selling price, its not THEIR selling price

richms

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#1903805 18-Nov-2017 19:25

tdgeek:

No, you dont need to explain why, Im not stupid. I am keen to know if say veggies have GST as they do now, and then they dont that the price is unchanged. Supply and demand off course affects prices. So if GST was exempt tomorrow, and supply and demand is unchanged, then consumer prices are unchanged? I dont think so.

If you are a retailer the selling price incl GST is the selling price, its not THEIR selling price

As the normal buyer of those things that people think dont buy them because they are too expensive are looking at the shelf price to decide if they buy them or not. They dont care if its made up of $2 for the shop and $0.30 in tax or just $2.30 for the shop and the govt getting nothing, they see it as $2.30 they have to pay. Not claiming the GST back so its immaterial.

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#1903806 18-Nov-2017 19:35

richms:

tdgeek:

No, you dont need to explain why, Im not stupid. I am keen to know if say veggies have GST as they do now, and then they dont that the price is unchanged. Supply and demand off course affects prices. So if GST was exempt tomorrow, and supply and demand is unchanged, then consumer prices are unchanged? I dont think so.

If you are a retailer the selling price incl GST is the selling price, its not THEIR selling price

As the normal buyer of those things that people think dont buy them because they are too expensive are looking at the shelf price to decide if they buy them or not. They dont care if its made up of $2 for the shop and $0.30 in tax or just $2.30 for the shop and the govt getting nothing, they see it as $2.30 they have to pay. Not claiming the GST back so its immaterial.

But, it will in fact be $2 not $2-30 so it is material. Those on lower incomes have little or no PDI, and that 30c will be re spent back into the economy.

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#1903813 18-Nov-2017 19:50

Why would it be $2? They have established that $2.30 is the optimal sale price. That may change a little because of it, but certainly they are not going to decide to swap the price out for $2 just because they have warm fuzzy feelings in their heart about selling them cheaper.

Otherwise it would be $1.80 or so already

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#1903815 18-Nov-2017 19:57

richms:

Why would it be $2? They have established that $2.30 is the optimal sale price. That may change a little because of it, but certainly they are not going to decide to swap the price out for $2 just because they have warm fuzzy feelings in their heart about selling them cheaper.

Otherwise it would be $1.80 or so already

Its 2-30. They remove GST its $2. For the retailer it always was $2. With GST or exempt from GST its always $2 for the retailer. The 30c is just a Balance Sheet item. A Liability.

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#1903818 18-Nov-2017 20:04

There are so many reasons why removing GST from some food types is a bad idea - starting with the fact that it's not a huge saving for poor people (eg the woman who feeds a family on $89 per week).

It's so open to abuse, debate and unfairness.

Eg, I buy fresh top quality eye fillet steak at $50 per kilo - GST free, fresh food. Some out of season snow peas and asparagus to go with that, say $20, also GST free. A nice meal for two.

Meanwhile, someone on a much lower budget to me wants to buy some baked beans and processed meat (eg sausages) to feed their family, and has to pay GST, Or, buys an occasional treat takeaway for their family and pays GST. And all so that on a typical low-budget grocery basket of say $150 per week, maybe $10 is saved

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#1903826 18-Nov-2017 20:28

shk292:

There are so many reasons why removing GST from some food types is a bad idea - starting with the fact that it's not a huge saving for poor people (eg the woman who feeds a family on $89 per week).

It's so open to abuse, debate and unfairness.

Eg, I buy fresh top quality eye fillet steak at $50 per kilo - GST free, fresh food. Some out of season snow peas and asparagus to go with that, say $20, also GST free. A nice meal for two.

Meanwhile, someone on a much lower budget to me wants to buy some baked beans and processed meat (eg sausages) to feed their family, and has to pay GST, Or, buys an occasional treat takeaway for their family and pays GST. And all so that on a typical low-budget grocery basket of say $150 per week, maybe $10 is saved

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.

MarkH67

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#1903827 18-Nov-2017 20:34

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.

Now it is getting REALLY complicated. You will exclude meat, but not $50 steaks? How will you work this exactly? Before you know it this whole thing will get way out of hand with a big list of basic items that people think should be exempted but it will be so hard to exempt the basic items without some luxury items falling under the same categories.

Let's be sensible, if you exclude certain food types like meat then $50 steaks will be excluded as will $40/kg snapper. $1/kg apples will be excluded and so will $25/kg passionfruit.

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#1903891 18-Nov-2017 23:57

SirHumphreyAppleby:

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.

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

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#1903892 18-Nov-2017 23:59

MarkH67:

tdgeek:

If GST was exempt on fresh veggies and fruit and meat, and many dairy thats simple. It needs to be kept simple.

The price of fruit and veggies is set by supply and demand, I can elaborate on exactly why if you like.

If you made fruit and veggies exempt from GST the price would still be the same, because supply & demand would be unchanged.

Therefore there is no real advantage to making fruit & veggies exempt from GST.

Then there is the issue of other staples - what about bread? Where exactly does it end.

Lets make it simple. If it is a commonly accepted foodstuff you can eat, no GST. Doesn't matter if it is chocolate or kale.

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#1903895 19-Nov-2017 01:11

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.

Food prices on lots of items vary by far more than 15%. So retailers will definitely just increase their prices to take advantage of the now lacking GST on some foods.

A whole list of regulations will have to be written defining what foods are GST free, how much they can be processed by until they then have to be sold with GST etc. Meat - say beef, Is T bone steak going to be subject to GST, but rump and chuck steak GST free? A definition of each type would have to be written into law. Potatoes - presumably raw potatoes will be GST free, and potato chips will have GST. Is cutting a potato into pieces enough for it to be liable for GST? Should mashed potato also be liable? If not, how small can I chop the pieces of potato before I then have mashed potato? Can the potatoes be pre cooked? Vegetables - If chopped and combined to make a simple salad - GST free or not? What about the salad dressing?

Tax inspectors would need to raid restaurants to find out if they are mis declaring their meat and vegetables. If Im buying food items for business purposes, Or even paying for a restaurant meal as a business expense, I will have to find out how much GST has already been paid, So I can correctly calculate how much GST I would need to pay.

Should rich people be given cheaper food? As they are more likely to be able to afford Organic, raw, whole foods. So rich people could well end up benefiting more from some food items being made GST free. And they can definitely afford to pay for accountants and lawyers to make sure that they would pay the least amount of GST.

tdgeek

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#1903906 19-Nov-2017 07:54

MarkH67:

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.

Now it is getting REALLY complicated. You will exclude meat, but not $50 steaks? How will you work this exactly? Before you know it this whole thing will get way out of hand with a big list of basic items that people think should be exempted but it will be so hard to exempt the basic items without some luxury items falling under the same categories.

Let's be sensible, if you exclude certain food types like meat then $50 steaks will be excluded as will $40/kg snapper. $1/kg apples will be excluded and so will $25/kg passionfruit.

Bad wording on my part, I meant all natural meat not your focus on $50 steaks. All natural meat, veggies, fruit, milk and some dairy are exempt. Easy. Its just a product code that does not add GST

tdgeek

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#1903907 19-Nov-2017 08:08

Aredwood:

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.

Food prices on lots of items vary by far more than 15%. So retailers will definitely just increase their prices to take advantage of the now lacking GST on some foods.

A whole list of regulations will have to be written defining what foods are GST free, how much they can be processed by until they then have to be sold with GST etc. Meat - say beef, Is T bone steak going to be subject to GST, but rump and chuck steak GST free? A definition of each type would have to be written into law. Potatoes - presumably raw potatoes will be GST free, and potato chips will have GST. Is cutting a potato into pieces enough for it to be liable for GST? Should mashed potato also be liable? If not, how small can I chop the pieces of potato before I then have mashed potato? Can the potatoes be pre cooked? Vegetables - If chopped and combined to make a simple salad - GST free or not? What about the salad dressing?

Tax inspectors would need to raid restaurants to find out if they are mis declaring their meat and vegetables. If Im buying food items for business purposes, Or even paying for a restaurant meal as a business expense, I will have to find out how much GST has already been paid, So I can correctly calculate how much GST I would need to pay.

Should rich people be given cheaper food? As they are more likely to be able to afford Organic, raw, whole foods. So rich people could well end up benefiting more from some food items being made GST free. And they can definitely afford to pay for accountants and lawyers to make sure that they would pay the least amount of GST.

Fair points, restaurant foods I hadn't considered.

My focus was making healthy foods cheaper. That helps poor people, it also helps the health system.

1. Raw meat, veggies, fruit, some dairy, with a line in the sand for partly processed.

2, Restaurant foods that are cooked from raw, no GST charged to public. As the vast majority of the meal are non GST items

3. Macca's, KFC etc are charged as based on processed component and high salt are not healthy, so thats easy. Yes, they buy chicken etc and do not get charged GST, but they charge to the public.

Re rich people pay less, well they do now. Rich person pays the same GST as a poor person for kale. Same $ but a massive different % on PDI.

The only way to make it really fair is to charge GST on a persons income basis, less GST for the poor , more for the rich, so the average GST revenue is unchanged but thats clearly not workable. GST free healthy food is a slight improvement. Home cooked meal is cheaper, Macca's is a bit more expensive, thats fine by me

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