For several years, local retailers have grumbled that, tax-wise, they do not compete on a level playing field with increasingly popular international online sellers. Now action is imminent, they have, paradoxically, been left with yet more cause for complaint. The Government has elected to tackle only the easiest aspect of this issue, leaving most retailers no better off. In the interests of consistency and fairness, a solution that satisfies all retailers needs to be found quickly.
At the moment, it is proposed only that overseas online suppliers of "intangibles", such as downloaded books, music, videos and software, will have to pay GST. This will mean the likes of Netflix and iTunes must register with Inland Revenue and then collect GST on their sales on behalf of the taxman. This should present little problem because it is a well-trodden path. Countries such as South Africa, South Korea and Switzerland already demand this. Major beneficiaries will be New Zealand suppliers of digital entertainment, such as Sky Television and Spark. But extending this principle to collecting GST on low-value physical imports, such as printed books and electronic equipment, is an altogether different matter. As Revenue Minister Todd McClay notes, this has not been attempted elsewhere. And collecting GST on such goods at the border is fraught with difficulty. Customs and Inland Revenue officials have examined this for some time. Both they and their overseas counterparts face the same problem: that of making the tax take worth the money, time and effort spent collecting it. With all that in mind, the Government has put out a discussion document, effectively postponing action indefinitely.
But Australia's announcement on Friday that it will bring all overseas internet suppliers into the GST net from July 2017 means that position will soon be untenable. The Australians are confident they can surmount what Mr McClay describes as "logistic issues". These include the sheer number of businesses involved. The bigger ones, such as Amazon, may agree to collect tax. But many of the smaller ones would not find that worthwhile. They could stop supplying New Zealanders, or not comply, creating an enforcement problem. Australia will seek to address this by exempting businesses with a turnover of less than A$75,000 from the requirement to collect GST.
This approach appeals more than attempting to collect the tax at the border. Now, that is applied when goods bought online are worth $225 to $400. The Government has suggested that threshold could be as low as $20. But when a 15 threshold was applied in Britain, it soon became apparent the sum collected by customs officials was not worth the effort, and a low priority is attached to it.
Yet it is on low-value physical goods most of the tax is forgone. And it is there most local retailers face the strongest competition, and the threat to jobs is biggest. Just how much this would check the growth of online shopping is debatable. It attracts customers on choice as much as cost. But if Australia's initiative works well enough, this country should be quick to follow suit.
