GST to be charged on purchases below $400

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20157 posts

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#2006578 2-May-2018 14:47

Hammerer:

There's no connection between the government funding consumer protection and the government receiving GST revenue. GST largely offset sales taxes and personal income tax when it was introduced in 1986. The Consumer Guarantees Act was 1993.

I understand that there is no connection, however GST has risen since the CGA came in. But it doesn't make much sense that consumers are covered by the CGA for personal use, and if it was purchased for business use, you generally aren't covered. The main difference is that consumers have to pay GST, whereas business can claim it back. Also someone has to pay for the commerce commission and enforcement of the CGA etc, although it probably comes out of general taxes, it has to still be paid for, so some amount from any goods purchased from a NZ retailer would be paying for that. So that is probably covered by the higher price of goods, and all the compliance costs and overheads that NZ businesses have to pay, which overseas retailers don't have to pay.

marej

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#2006589 2-May-2018 15:11

mattwnz:

Hammerer:

There's no connection between the government funding consumer protection and the government receiving GST revenue. GST largely offset sales taxes and personal income tax when it was introduced in 1986. The Consumer Guarantees Act was 1993.

I understand that there is no connection, however GST has risen since the CGA came in. But it doesn't make much sense that consumers are covered by the CGA for personal use, and if it was purchased for business use, you generally aren't covered. The main difference is that consumers have to pay GST, whereas business can claim it back. Also someone has to pay for the commerce commission and enforcement of the CGA etc, although it probably comes out of general taxes, it has to still be paid for, so some amount from any goods purchased from a NZ retailer would be paying for that. So that is probably covered by the higher price of goods, and all the compliance costs and overheads that NZ businesses have to pay, which overseas retailers don't have to pay.

It does make sense - a fridge used in an office which is opened and closed by multiple people to get milk out is not the same use in a home of the consumer. GST is claimed back/offset by the amount collected. Businesses are essentiallly unpaid tax collectors.

Geektastic

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#2006593 2-May-2018 15:20

frankv:
Hammerer:

There's no connection between the government funding consumer protection and the government receiving GST revenue. GST largely offset sales taxes and personal income tax when it was introduced in 1986. The Consumer Guarantees Act was 1993.

I'm sure Matt didn't mean 'funding' in terms of the Govt.

When I buy something from an NZ business, they have to factor in the costs of complying with CGA into the price of their goods. If 10% of their products fails CGA due to e.g. poor workmanship, they have to increase their price by 10% plus the cost of dealing with the problem. A Chinese seller can sell you any shoddy junk they like; once AliExpress's time limit has expired, you have no comeback.

Even if the goods are faulty when you receive them, the seller may insist you return them (at a cost much higher than the value of the goods) to get your refund.

[Edit:] The same applies to labour protection laws, health & safety laws, etc.

In some cases you would be paying twice.

There are any number of products which have lifetime warranties on them from the maker. Snap On tools are one that springs to mind. Burris rifle scopes are another - there are many.

If the manufacturer will simply replace the product if it ever fails, the CGA would never apply, so any NZ retailer applying additional funds for that is doing so needlessly.

mattwnz

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#2006604 2-May-2018 15:53

marej:

It does make sense - a fridge used in an office which is opened and closed by multiple people to get milk out is not the same use in a home of the consumer. G

Same with a big family though you may have 10 people in the household or flatting situation, the wear and tear could be just as high or higher. Plus big offices probably should be buying commercial grade stuff, rather than consumer grade. Many business in NZ are small business with only a few staff, and many are sole operators, so may get less wear than when used for residential use. But I can understand what you mean, although often consumer items have more wear than business ones. The issue may come where it comes to consequential loss, as for a business this cost could be significant.

tripp

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#2006605 2-May-2018 15:55

rugrat: Trade me could get hit by it to as they have foreign sellers.
They’re not happy.

https://i.stuff.co.nz/business/industries/103548827/fear-trade-me-will-have-to-levy-gst-on-many-items-sold-through-its-marketplace

Yes they say they are all about the buying experience until it gets to hard and now want to keep the current "charge at the border for GST" because they let oversea sellers flood their website with products that don't really sell.

mattwnz

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#2006619 2-May-2018 16:34

tripp:

rugrat: Trade me could get hit by it to as they have foreign sellers.
They’re not happy.

https://i.stuff.co.nz/business/industries/103548827/fear-trade-me-will-have-to-levy-gst-on-many-items-sold-through-its-marketplace

Yes they say they are all about the buying experience until it gets to hard and now want to keep the current "charge at the border for GST" because they let oversea sellers flood their website with products that don't really sell.

As overseas sellers are 'In trade' , and trademe says 'In trade' sellers must abide by the CGA as shown in the link below. I wonder if those overseas sellers have to pay something to trademe to cover any CGA issues, as what happens if a overseas seller refuses to help with a problem on a purchased item. IMO it would make sense that overseas sellers on trademe are also charging GST

https://www.trademe.co.nz/help/786/in-trade-disclosure

rugrat

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#2006649 2-May-2018 17:47

People keep linking CGA and GST together.

They have nothing to do with each other, GST was introduced to move tax away from income tax.

The argument in favour is that GST makes it harder to tax dodge, cash jobs etc still end up getting tax paid when money spent.

And now we're seeing the disadvantage of GST to income Tax, with GST there's ways an income earner can buy stuff without that component, and the fix to me seems like there could be problems, I hope they prove me wrong.

With income tax, it's easier for business owners to dodge tax, which they can still do on income component, bit hard for them to buy online with cash, and if use credit card unlike cash it is traceable.

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Rikkitic

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#2006659 2-May-2018 18:00

rugrat:

And now we're seeing the disadvantage of GST to income Tax, with GST there's ways an income earner can buy stuff without that component, and the fix to me seems like there could be problems, I hope they prove me wrong.

With income tax, it's easier for business owners to dodge tax, which they can still do on income component, bit hard for them to buy online with cash, and if use credit card unlike cash it is traceable.

What about Bitcoin?

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tdgeek

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#2006670 2-May-2018 18:22

mattwnz:

Hammerer:

There's no connection between the government funding consumer protection and the government receiving GST revenue. GST largely offset sales taxes and personal income tax when it was introduced in 1986. The Consumer Guarantees Act was 1993.

I understand that there is no connection, however GST has risen since the CGA came in. But it doesn't make much sense that consumers are covered by the CGA for personal use, and if it was purchased for business use, you generally aren't covered. The main difference is that consumers have to pay GST, whereas business can claim it back. Also someone has to pay for the commerce commission and enforcement of the CGA etc, although it probably comes out of general taxes, it has to still be paid for, so some amount from any goods purchased from a NZ retailer would be paying for that. So that is probably covered by the higher price of goods, and all the compliance costs and overheads that NZ businesses have to pay, which overseas retailers don't have to pay.

Thats the big issue. Bricks and mortar, insurance, power, cleaners and many so ons. The benefit is local warranties, and you can take it home now. The disadvantage is they cannot compete on price, and these days thats almost all that matters. Businesses in NZ need to look at competition and if they are competing with online, bug out. Then the purchasers will still whine as no warranty, after they whined about high prices and ditched local sellers.

tdgeek

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#2006671 2-May-2018 18:24

mattwnz:

marej:

It does make sense - a fridge used in an office which is opened and closed by multiple people to get milk out is not the same use in a home of the consumer. G

Same with a big family though you may have 10 people in the household or flatting situation, the wear and tear could be just as high or higher. Plus big offices probably should be buying commercial grade stuff, rather than consumer grade. Many business in NZ are small business with only a few staff, and many are sole operators, so may get less wear than when used for residential use. But I can understand what you mean, although often consumer items have more wear than business ones. The issue may come where it comes to consequential loss, as for a business this cost could be significant.

I doubt that very much. Plus the business claims back GST so its cheaper.

tdgeek

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#2006672 2-May-2018 18:26

tripp:

rugrat: Trade me could get hit by it to as they have foreign sellers.
They’re not happy.

https://i.stuff.co.nz/business/industries/103548827/fear-trade-me-will-have-to-levy-gst-on-many-items-sold-through-its-marketplace

Yes they say they are all about the buying experience until it gets to hard and now want to keep the current "charge at the border for GST" because they let oversea sellers flood their website with products that don't really sell.

The classic human reaction (TradeMe) I support that (unless it affects me)

rugrat

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#2006675 2-May-2018 18:28

Rikkitic:

rugrat:

And now we're seeing the disadvantage of GST to income Tax, with GST there's ways an income earner can buy stuff without that component, and the fix to me seems like there could be problems, I hope they prove me wrong.

With income tax, it's easier for business owners to dodge tax, which they can still do on income component, bit hard for them to buy online with cash, and if use credit card unlike cash it is traceable.

What about Bitcoin?

Is converting cash to bitcoin traceable, plus how many places except Bitcoin for physical goods?

Plus I'm not sure how safe Bitcoin is, will it's value just crash without warning?

And purchases have to be under $400, for arriving at boarder, and it seems if to many arrive in a short time, risk of customs adding combined value together.

This whole exercise seems to be going to all this trouble to target under $60 GST transactions, so it's going after the small man.

Business owner will be doing more then $60 tax dodges (for ones that do this)

Tzoi

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#2006679 2-May-2018 18:43

shk292:

Rikkitic:

I still don't understand how this would work with sites like Aliexpress or maybe even Amazon. I do most of my shopping with Aliexpress. As far as I can see, they are just acting as an agent for many small traders. They don't actually sell anything themselves. I buy different things from different traders and they all go into my shopping basket, but what does Aliexpress have to do with collecting taxes? For the record, I don't have a problem with the tax itself and am not looking for ways to avoid it. I just don't understand why Aliexpress would feel obligated to collect it, or care about doing so.

It's the same - even more so - with ebay. You pay the seller, an individual, when you buy the goods. You then tell the seller the delivery address. I can't see how ebay are going to intervene in this process to charge NZ GST without a major change to their platform. I'd say they are more likely to tell NZ Govt to take a hike

Here's a for instance - what if my friend in the UK buys an item <$400 from Amazon and then sells it to me and sends it to NZ? No lies or false declarations required, no GST payable. And my friend gets a nice bottle of wine for his trouble

Aliexpress would feel obligated to collect it because if they didn't they wouldn't be in compliance with New Zealand law - though I'm not sure whether NZ has an agreement with China about mutual collection of taxes. But it would get a lot of bad press and IRD would probably go through every avenue they have available to get the GST since Aliexpress probably is a large proportion of online sales into New Zealand.

On Ebay and Aliexpress, do they collect the money, deduct the fee and then pass the rest of the money to the seller? Or does the money go direct to the seller, who then pays Ebay/Aliexpress the fee? I would imagine it is the first case in which case they would just increase the amount they withhold.

Re having a friend buying it then selling to you, I think that is a perfectly fine workaround (so long as they don't sell you more than $60k worth of stuff!)

Re CGA, that doesn't really have anything to do with GST, but the need to comply with it is probably a reason why buying a good domestically is more than 15% more expensive than buying it overseas.

Overseas companies can say in their T&C that the law of their country applies to the transaction, so CGA doesn't apply. NZ companies can't contract out.

jarledb

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#2006680 2-May-2018 18:44

Rikkitic:

What about Bitcoin?

Price of 1 Bitcoin the last 30 days:

Low: Around $6,600 USD
High: Around $9,600 USD

Price to exchange a Bitcoin: Around $28 USD.

Not exactly a steady currency. Would not want to pay with or accept Bitcoin myself..

Besides, IRD and other tax departments around the world reportedly look at Bitcoin as a way to white washing money, so expect to be in their crosshairs if you have a lots of them and exchange them into a NZD bank account.

All in all it just feels like a bubble to me.

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mattwnz

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#2006685 2-May-2018 18:56

I thought that about the housing bubble in NZ, but it hasn't yet popped. Although far more likely I think with something like bitcoin due to how many people are now getting into it as a hope to get rich quick.

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