Editorial: Internet GST more trouble than it's worth

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Photo / Thinkstock
Photo / Thinkstock

It is hardly surprising that New Zealand retailers are keen observers of an Australian campaign to have GST collected on privately imported goods. As if times were not tough enough in retailing on both sides of the Tasman, the current strength of the Australian and New Zealand dollars is giving consumers added reason to buy goods over the internet. On-line shopping, notably for easy-to-ship items such as DVDs, CDs, computer software and books, is becoming an increasingly popular option. Imposing GST on such items would not only take much of the gloss off such purchases but would swell Government coffers.

The Australian campaign is being spearheaded by large chains, such as Harvey Norman and Myer. They have warned Canberra that if GST is not imposed on internet goods, thousands of jobs are at risk. The New Zealand Retailers Association says it has similar concerns for the 325,000 people employed in retailing. It wants GST on all goods bought privately overseas, excluding gifts. The big plus for the Government, it says, would be tax revenue of about $500 million.

The consumption tax is imposed on goods and services in New Zealand, as well as most imported goods and some imported services. The consistency of GST's application in this country is one of its strengths. There are none of the variations that have created difficulties in overseas countries.

But in the area of imports, where there is reason to question even the presence of the tax, there is no such consistency. Confusion is the inevitable consequence.

Goods worth less than $400 can be bought online without paying GST. In theory, those worth more than that attract the tax because of their commercial value. But in practice, this is policed sporadically. There is good reason for this, namely the difficulty of collecting GST easily and efficiently in such circumstances.

And if Inland Revenue is disinclined to vigorously pursue online goods worth more than $400, there would surely be little purpose in going to great lengths to collect far smaller sums. More time, effort and money would be spent collecting the tax than is warranted by the eventual take.

Britain's experience provides evidence of the potential minefield. Goods bought on internet sites outside the European Union and worth more than £18 ($38) attract Britain's value-added tax. Uneven application and the fact so many online goods are captured have made this an area of considerable bewilderment and befuddling bureaucracy.

There are other reasons GST should not be applied. Those who shop online take risks in return for not paying the goods and services tax. In most instances, their purchases are not covered by the Consumer Guarantees Act, and they have limited or difficult recourse if things go wrong. Not paying GST seems a reasonable trade-off.

It is estimated that foreign internet buying makes up about 3 per cent of retail purchases. That is not large, but retailers' worries centre on the rapid growth of such transactions. Their concerns are probably overstated. Inevitable reductions in the value of both the New Zealand and Australian dollars will in time remove some of the attractiveness of private importing. As well, the vast majority of people will always take pleasure in the human interaction and service that is part and parcel of buying in stores.

Online shopping will undoubtedly continue to increase in popularity, notably for articles that people cannot buy easily at home. But the retailers' campaign on both sides of the Tasman is surely one that both Governments can safely ignore.

- NZ Herald

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