Government planning changes to GST levy on overseas purchases

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2886 posts

Uber Geek

#854055 11-Jul-2013 18:53

ubergeeknz: I'm with you on getting rid of GST. With the rise in online purchasing and therefore personal importation, I think it's really had it's day, aside from all the other problems with taxing on purchases.

As far as taxes go, GST works quite well. It's a low(ish) rate, with simple rules a broad base, and its pretty difficult to avoid. In terms of personal imports it isn't much of a big deal revenue wise. They lose some potential revenue, but it's on low value transactions where it would cost more to collect than it's worth. Compared to the lost tax, and potential to get more money through better enforcement, this is small beer compared to income tax and company tax. Plus:

- while some people (criminals with undeclared and untaxed cash drug income etc, those with very clever lawyers and accountants, and those with income hidden offshore) can avoid income tax, they have to spend the money somewhere so at least society gets a bite, and

- it's a tax on consumption, rather than work and saving (and surely that's the incentive we want).

Repealing GST would require a fairly big sum to be raised.

A big rise income tax would make avoidance much worse, create huge incentives for skilled people to work offshore for a decade or so, penalise work compared to consumption, and encourage smart people to spend their time/effort on tax minimisation and advice rather than actually producing things.

A big rise in company tax would drive businesses offshore, and create a huge incentive for them to invest in better tax lawyers and accountants rather than producing stuff.

Capital gains tax is an option (bear in mind capital gains are already taxable in many situations). But only if the family home isn't exempted. Exempting the family home will create a huge incentive to pour even more of your savings into your house (tax free capital gains) instead of a business where any value you create is taxed. Bias towards housing instead of productive investment is already a huge problem, and the exemption would make it worse.

A financial transactions tax which some promote as a painless way of getting huge revenue, painlessly and with a tiny tax, is fantasyland. It wouldn't raise a fraction of what is claimed, as the tax base would evaporate. The underlying transactions would simply and easily just move offshore.

Better to just suck the lemon, and admit that no taxes are perfect but (as far as taxes go) GST is better than many. Don't let the issue of small personal imports not being assessed for GST become the tail that wags the dog.

Bung

6480 posts

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#854100 11-Jul-2013 21:23

Klipspringer:
Customs Minister Maurice Williamson says it would be virtually impossible to charge GST on items being bought online

The credit card GST purchase would be silly.

How would they tell the difference between online payments? And physical payments. Ie. When holidaying out of of the country and using my NZ credit card?

Maurice Williamson must be quite removed from his technology background by now.

If it is virtually impossible why are there are a lot of other Governments chasing this? In the US the individual States want their sales tax from the on-line distributors. There is talk that the US Federal Government may be considering a VAT scheme to pay the huge bills they have been racking up.

Things that may be impossible for NZ alone could be brute forced by bigger players.

sultanoswing

814 posts

Ultimate Geek

#854138 11-Jul-2013 23:13

Bung:
Klipspringer:
Customs Minister Maurice Williamson says it would be virtually impossible to charge GST on items being bought online

The credit card GST purchase would be silly.

How would they tell the difference between online payments? And physical payments. Ie. When holidaying out of of the country and using my NZ credit card?

Maurice Williamson must be quite removed from his technology background by now.

If it is virtually impossible why are there are a lot of other Governments chasing this? In the US the individual States want their sales tax from the on-line distributors. There is talk that the US Federal Government may be considering a VAT scheme to pay the huge bills they have been racking up.

Things that may be impossible for NZ alone could be brute forced by bigger players.

Possibly - but I can hardly see NZ able to muscle any US companies into collecting tax and sending it to lil' ol NZ.

Nation states would be far better to get together to enact a) a global financial transaction tax, which, as pointed out above, works properly only if everyone is in and b) blocking international corporate tax loopholes like the ones Apple, Starbucks and Google use to pay almost no tax.

But, like the paperboy tax, it's soooo much easier for them to go after all of us common-folk.

Forward-thinking New Zealand businesses should also be against this tax - after all, we are best served by making our exports cheaper, and this is not served if other countries are able to add their GST/VAT onto our exported goods. Wake up, politicians!

mattwnz

20149 posts

Uber Geek

#854143 11-Jul-2013 23:29

That is a good point about exports to other countries getting taxed. But don't some of them already have a carbon miles tax, based on how far they have been shipped from.

The other thing about GST, is that it is an NZ tax, and one of the things you get is additional consumer protection. This is why businesses don't get consumer protection, because they don't have to pay GST. People will be paying GST on imported goods, but won't be getting that CGA protection.

jarledb

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#854161 12-Jul-2013 04:50

sultanoswing: Possibly - but I can hardly see NZ able to muscle any US companies into collecting tax and sending it to lil' ol NZ.

Already doing it here, our GST-limit is 50 NZD and they also add GST on online services. Several foreign companies adding GST for services now. Its coming to the whole world, GST will be added according to the rules of the country you are buying goods or services from.

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graemeh

2078 posts

Uber Geek

#854188 12-Jul-2013 08:48

mattwnz: The other thing about GST, is that it is an NZ tax, and one of the things you get is additional consumer protection. This is why businesses don't get consumer protection, because they don't have to pay GST. People will be paying GST on imported goods, but won't be getting that CGA protection.

Where the heck did you get that conclusion from?

The consumer protection legislation has nothing to do with GST.

plas

453 posts

Ultimate Geek

#854197 12-Jul-2013 09:00

Bung:
Klipspringer:
Customs Minister Maurice Williamson says it would be virtually impossible to charge GST on items being bought online

The credit card GST purchase would be silly.

How would they tell the difference between online payments? And physical payments. Ie. When holidaying out of of the country and using my NZ credit card?

Maurice Williamson must be quite removed from his technology background by now.

If it is virtually impossible why are there are a lot of other Governments chasing this? In the US the individual States want their sales tax from the on-line distributors. There is talk that the US Federal Government may be considering a VAT scheme to pay the huge bills they have been racking up.

Things that may be impossible for NZ alone could be brute forced by bigger players.

If I remember correctly the U.S bill is a bit different from what NZ is dreaming up. At the moment all physical stores in the U.S who also run an online store must apply the correct state taxes on online orders. Where as online only stores such as Amazon you only pay these state taxes if Amazon has a distribution center or office in your state. So some states are missing out on revenue because Amazon doesn't run a distribution center/office in their state.
This bill is designed to level the playing field so all online orders from U.S based online retailers must apply the correct state tax, So this should be pretty straight forward to implement. They won't be able to enforce this to an online store that operates completely outside of the U.S. This shouldn't be too much of an issue because I would guess most online sales are from stores operating in the U.S.

Since most of our online orders are from companies outside of NZ the Government knows they can't enforce sales tax so they are dreaming up silly ideas like getting Mastercard/Visa to collect it on all foreign transactions.

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Satch

1985 posts

Uber Geek

#854206 12-Jul-2013 09:12

Something I posted on FB yesterday...

So I saw an ad for this watch on the outside of the Mont Blanc boutique on Queen Street, Auckland on the way back from my physio appointment. It caught my eye so I went in to find out more about it. The NZ retail was NZD$8,580.

A quick look on Amazon and I can get the exact same watch delivered to my door in 2-5 days for a total of NZD$5,845.62 which includes being stung NZD$782.23 by Customs for GST and other fees (no duty on watches though). That is NZD$2,734.38 cheaper than buying local!!! And I'm sure I'd be able to find the watch for even cheaper after doing a little Google magic.

Retailers in this country really need to wake up. Enforcing GST on all imports isn't going to make a difference for all but the cheapest of items...

http://www.amazon.com/gp/product/B004GLYY0Q/ref=ox_sc_sfl_title_1?ie=UTF8&psc=1&smid=A1IKNOHA1JUMXJ

TwoSeven

1623 posts

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#854319 12-Jul-2013 12:36

sleemanj:
TwoSeven: Does a shop have to pay 15% import tax on things they bring in. If that is the case wouldn't it be better for the government to remove that import tariff so that the shops can compete on a level playing field ?

Seems like you're not really familiar with how GST work, this isn't really the right thread to be telling you but in short you can think of it as vendors do not pay GST, but they must charge it to consumers, the GST charged gets given to the government.

Sorry, but I do know how GST works in NZ. Private imports can be subject to both an import duty and GST (on the NZ $ equiv. of the landed value).

What I was asking is that when NZ retailers import goods on a retail scale (rather than individually/privately as consumers do), are they subject to GST on the import as we consumers are, or are there different import taxes that they pay instead.

If they are paying a flat 15% rate on imported goods and they need to also levy 15% sales tax then their prices that the consumer pays for low end goods are going to be significantly higher than that of an overseas producer who is not subject to the same tariffs.

Realistically I don't see why we need the import tariff on goods at all if retailers have to pay it as it unfairly penalises them against the competition. Not having this tax, or perhaps even removing it for bulk imports (say above $10k or something like that) would allow them to compete with overseas purchases on a more level playing field. I think removing the tax or lifting the threshold would be easier to implement rather than the current proposals.

Since we all pay the tax on expensive goods (such as TVs) that particular playing field is already level I suspect and retailers in that space probably need to focus on more efficient business and supply models.

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sleemanj

1490 posts

Uber Geek

#854323 12-Jul-2013 12:48

TwoSeven:
What I was asking is that when NZ retailers import goods on a retail scale (rather than individually/privately as consumers do), are they subject to GST on the import as we consumers are.

GST registered businesses (almost all businesses are GST reg) are never effectively "subject to GST" for matters involving the GST entity, not on imports, not on anything. All GST that a GST registered entity pays while it is GST registered is refunded to them either by means of deduction from the GST they collect, or direct refund from the IRD if their GST paid exceeds the GST collected.

TwoSeven:
Realistically I don't see why we need the import tariff

There is no "import tariff". There is a duty on some goods, and there is GST. Customs only collects if it's worth custom's time to collect, commercial importers seldom import small enough quantities that it would not be worth collecting. If customs decides to collect duty/gst, then they also add a fee called the IETF.

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mattwnz

20149 posts

Uber Geek

#854330 12-Jul-2013 13:10

graemeh:
mattwnz: The other thing about GST, is that it is an NZ tax, and one of the things you get is additional consumer protection. This is why businesses don't get consumer protection, because they don't have to pay GST. People will be paying GST on imported goods, but won't be getting that CGA protection.

Where the heck did you get that conclusion from?

The consumer protection legislation has nothing to do with GST.

Why aren't business purchases covered by the CGA. The only difference in terms of cost of the product, is that business don't pay GST. Otherwise aren't businesses being treated unfairly ¿
Otherwise what pays for the cost of providing the CGA to NZ, and why would imported and business goods not be covered?

graemeh

2078 posts

Uber Geek

#854335 12-Jul-2013 13:17

mattwnz: Why aren't business purchases covered by the CGA. The only difference in terms of cost of the product, is that business don't pay GST. Otherwise aren't businesses being treated unfairly ¿
Otherwise what pays for the cost of providing the CGA to NZ, and why would imported and business goods not be covered?

The importer/manufacturer and retailer bear the cost of providing the CGA so ultimately it is the end purchaser of the product or service that is paying for the CGA as the retailer will factor their CGA obligations into the price.

This is nothing to do with GST.

vectran

59 posts

Master Geek

#854373 12-Jul-2013 14:07

mattwnz:
graemeh:
mattwnz: The other thing about GST, is that it is an NZ tax, and one of the things you get is additional consumer protection. This is why businesses don't get consumer protection, because they don't have to pay GST. People will be paying GST on imported goods, but won't be getting that CGA protection.

Where the heck did you get that conclusion from?

The consumer protection legislation has nothing to do with GST.

Why aren't business purchases covered by the CGA. The only difference in terms of cost of the product, is that business don't pay GST. Otherwise aren't businesses being treated unfairly ¿
Otherwise what pays for the cost of providing the CGA to NZ, and why would imported and business goods not be covered?

The Consumer Guarantees Act 1993 provides great protection for consumers (not businesses). The Fair Trading Act applies to business entities but does not extend the same levels of protection as that in the CGA.

Businesses collect GST on behalf of the government (Goods and Services Tax Act 1985) as it is a consumption tax. Businesses can claim valid GST credits to offset their GST liability as to ensure that GST is only effectively charged once per transaction (rather than both at source and at sale).

sleemanj

1490 posts

Uber Geek

#854401 12-Jul-2013 14:44

mattwnz:
Otherwise what pays for the cost of providing the CGA to NZ, and why would imported and business goods not be covered?

What cost is there in providing the CGA? The legislative cost? Well, what pays for any other law making.

Court costs? The disputes tribunal charges you a filing fee, and for the rest, again, what pays for any other hearing.

Business compliance costs? Incorporated into the sale price.

Imported goods are not covered, because the people you bought it from are not subject to NZ law.

Business goods are not covered, because businesses have specific and different needs to consumers, they have formal contracts and service agreements, they subject goods to different levels of usage. Legislating around that, virtually impossible. The CGA is airy fairy and hand wavey enough as it is and that is just trying to deal with consumers.

And if there really needs to be anything else to say that the CGA and GST have nothing to do with one another, the CGA was introduced in 1993. GST, way back in 1986.

---
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I sell lots of stuff for electronic enthusiasts...

mattwnz

20149 posts

Uber Geek

#854416 12-Jul-2013 15:10

There may not be a direct link between the CGA and GST, but it is probably the closest tax to be associated with it's associated costs. There are costs with the CGA, such as enforcement, offices, staff, court costs (the fee people pay to lodge a clain is just a small contribution) , education, etc, which I expect comes out of the NZ tax take as a whole. Petrol tax didn't used to be dedicated to roads and transport, it used to just go into the big NZ consolidated fund, so also didn't used to have any direct association.
My point is though, that if someone wants CGA protection, then they buy locally, pay the GST, and expect to pay more as a result.

It does make me wonder what is stopping many NZ retailers setting up an online store themselves and basing their business overseas in a lower tax country, so people can buy online and not have to pay GST. That would then put them on a level playing field with the overseas businesses they are now competing with. Currently NZ consumers are being targeted by a lot of overseas online stores, many have NZ phone numbers and .nz domains, even NZ maps on their site, so they appear NZ operated, but they are fully run from overseas, so don't have to comply with any of NZ laws or GST.

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