Retailer blasts tax 'failure'

Hallenstein Glasson is among retailers feeling the pinch as consumers buy more online. Photo / Sarah Ivey

The New Zealand Retailers Association has reiterated its call for GST to be applied to all online purchases after the boss of Australasian clothing seller Hallenstein Glasson criticised the "failure" of the tax systems on both sides of the Tasman to collect the consumer tax on sales from overseas websites.

And new research released by the BNZ yesterday showed Kiwis' spending with overseas online retailers grew at almost four times the rate of domestic web-based spending last month.

At present New Zealand consumers can avoid GST on many goods bought for less than $400 from foreign internet retailers, such as Amazon. The threshold is lower for items to which duties apply, such as footwear and apparel.

In Australia the GST-free threshold is set at A$1000 ($1090).

Hallenstein Glasson chief executive Graeme Popplewell told shareholders at the annual meeting yesterday that it was hard to measure how much business the company was losing to international brands and "pure play" websites, but it would be naive to suggest there was no impact.

"What we do know is that the failure of the tax system in both New Zealand and Australia to collect GST from sales made by international websites to our customers puts us at a clear disadvantage," Popplewell said.

"I don't want to sound like sour grapes, but we are competing with an e-commerce world where profit margins are low or nonexistent and competition for market share is the name of the game."

Hallenstein Glasson's forecast of a 20 per cent decline in half-year profit would "come under pressure" if summer season sales did not improve to above last year's level, chairman Warren Bell told shareholders.

Retailers Association spokesman Russell Sinclair said pressure was growing on the Government to collect GST on all online purchases. "With GST not applying to those imports the Government is subsidising the offshore retailers," he said.

"It's not a level playing field."

The Inland Revenue Department and Customs have set up a working group to look at the issue and Sinclair said the group was expected to deliver a discussion paper before Christmas.

"Submissions will be called for before the end of March."

New Zealanders' online spending with overseas retailers rose about 20 per cent in November on the same month a year earlier, compared with just 5.5 per cent growth in domestic online spending, according to the BNZ's Online Retail Sales Index.

Steve Waite: Saving shops from tax free online shopping

When national children's clothing retailer JK Kids announced last month that it was closing, the company blamed intense competition from overseas websites, as well as the global economic downturn, for the demise of the chain, which employed about 125 staff.

"In terms of competition we're seeing quite a big impact from mothers, particularly younger mothers, buying online," JK Kids managing director Ben Sproat said.

"They're able to buy from the UK, the US and many outlets over there are offering freight free if you spend over a certain level."

Briscoe Group managing director Rod Duke - whose company operates Briscoes, Rebel Sport and Living & Giving Stores - said the present situation was unfair and GST should be applied to all purchases.

"It just seems to me to be a really unusual situation," he said.

Some Kiwi shoppers, of course, may argue that New Zealand retailers charge exorbitant margins and the status quo with regard to tax on overseas purchases should remain in place.

Consumer NZ chief executive Sue Chetwin has said that although she feels some sympathy for retailers, goods purchased overseas could be 50 per cent cheaper than the same items here.

"It's not just the 15 per cent [GST] - it's a hell of a lot more than that," she said this year.

Another difficulty would be introducing a system that could collect GST on all goods coming into New Zealand.

At the moment, if tax or duties apply to an imported item the buyer receives a letter from New Zealand Post instructing them to contact Customs and arrange payment.

In July Customs Minister Maurice Williamson said it would be virtually impossible to find an effective system to collect tax on all purchases.