In the matter of tax, online shopping is an aberration. Other importers are charged GST at the border, but those who buy books, clothing and other items worth less than $400 from international online sellers such as Amazon or download music and film from services such as iTunes are exempt.
There are several reasons for this. Any government is well aware there will be no applause from the many people forced to pay another 15 per cent for their online purchases. Equally, collecting the GST easily and efficiently is problematic. The question has always been whether the tax take will be worth the money, time and effort spent gathering it.
At some time, as online shopping continues to increase in popularity, the point at which this is worthwhile will be reached. The Prime Minister clearly believes it already has. He spoke yesterday of the forgone GST's considerable effect on the Government's tax take. "It is not so much a matter of clawing back revenue but base erosion - the ability to actually lose a huge amount of revenue because people are increasingly going online is something that eventually not only we need to deal with, but every country." John Key did not mention numbers, but in 2013 it was estimated that the Government was missing out on $300 million a year.
That sum will now have increased. But we are not much closer to securing a means of obtaining the GST that would warrant its collection. When Inland Revenue and Customs first began examining the issue a couple of years ago, Maurice Williamson, then the Customs Minister, remarked that this would be virtually impossible to do. He was guilty of overstatement, but it is notable that the Organisation for Economic Co-operation and Development, with which New Zealand has been working, has struggled to develop international rules. It is seeking to compel online retailers to collect and pass on GST. If they do not, they would not have access to shoppers in all OECD countries.
That appeals as an ideal solution. But disillusioned with the OECD's slow progress, Mr Key wants to know if New Zealand could go it alone. Officials have been asked to investigate what other countries are doing. When they report on the situation in Britain, there will be cause for further disillusionment. It has struggled to make the tax take worth the money, time and effort spent collecting it. Therefore, a low priority is now attached to taxing small online purchases. Customs officials would certainly not be going out of their way to collect value-added tax (Britain's version of GST) from the people referred to by Mr Key who had downloaded a song from iTunes for $1.29.
