40% support local retailers in foreign-GST wrangle

Kiwis flocked to the shops yesterday for the annual Boxing Day sales - but many are increasingly buying cheaper online from overseas. Photo / Dean Purcell

Goods bought on overseas websites should be subject to sales tax, many Kiwis tell pollsters

Nearly 40 per cent of New Zealanders believe GST should be charged on all purchases made on foreign shopping websites, a survey has shown.

The Government is estimated to miss out on up to $300 million in sales tax each year.

But New Zealand retailers struggling to compete with overseas sellers - whose sales are exempt from GST when they are for less than $400 - will have to wait for any decision on a potential crackdown.

Revenue Minister Todd McClay says the Government wants to see what other countries do first and a discussion document on the issue, due before Christmas, has been delayed until next year.

Kiwis flocked to the shops yesterday for the annual Boxing Day sales - but many are increasingly buying cheaper online from overseas.

A Herald-DigiPoll survey this month found that almost 55 per cent of the 750 New Zealanders polled had bought goods from foreign websites.

Of those surveyed, 53 per cent said the $400 exemption should not be removed as the tax would be too inconvenient to collect.

Surprisingly, just under 40 per cent - 38.5% - agreed with the view of the Retailers Association that the 15 per cent GST should be applied to all overseas online purchases to level the playing field for local retailers.

TradeMe spokesman Paul Ford said a change in GST law wouldn't affect it hugely, however it could impact on the small number of members who import goods from overseas to sell on the auction site.

Retail industry sources said because more than 50% of the public opposed introducing GST on online purchases under $400, the Government would be reluctant to move on the issue during an election year.

Mr McClay said he was unsurprised by the poll result and it reflected the competing interests of consumers and retailers.

While he has officials working on that and other issues related to taxing the digital economy, the minister said the issue would remain in the too-hard basket for the time being.

"If we're to find any solutions, it's going to be really important we find one that will work both for the retailers of New Zealand and consumers. It's not clear how that can be done yet."

Mr McClay decided to delay release of the discussion document after a recent visit to Europe, where he spoke with the European Commission and a number of other authorities about taxing online sales.

Those talks included consideration of wider issues around tax base erosion and profit shifting (BEPS), or in simple terms large international firms funnelling revenue from one country to another to minimise tax.

Mr McClay told the Herald that tax on online purchases was "not an issue New Zealand can solve by itself".

"I probably came away (from Europe) with the view that they're all concerned and considering the issue, approaching it slightly differently, and none of them have a solution at this time.

"Based on that, I have asked officials to do a bit more work."

Labour Party revenue spokesman David Clark said the Government "needs to explain to New Zealand businesses why they should be disadvantaged by having GST collected when overseas business don't face that challenge".

"It seems it would be pretty simple to speak with Amazon and other suppliers to ask them to collect GST since they collect, as I understand it, sales taxes for individual states in the US. If that's true, then it's obviously an ideological decision from the Government not to collect it."

John Albertson of the Retailers Association, which has been lobbying for action on the sales-tax issue, said there were viable solutions, particularly given recent technological advances in systems for paying by credit and debit cards.

"If we can't collect a tax from the card issuer (banks) as part of that payment process, I would be surprised."

If an agreement could be reached with PayPal as well as banks to collect sales tax, Mr Albertson said, "you've got most of the payments".

"It will require legislation and it will require some technology to be imposed on the banks. That will have a capital cost but I'm sure if the Government is going to collect $200-300 million a year, they can see their way clear to defray the costs to the banks."

Consumer NZ chief executive Sue Chetwin was unavailable for comment yesterday, but told Radio NZ this year that getting banks to collect GST on behalf of online retailers would be fraught with difficulties and was "doomed to fail".

She said it would be unworkable, as banks can't tell whether a person is overseas shopping or sitting at a computer in New Zealand.

Ms Chetwin was also concerned that banks would charge a fee for collecting the tax - another cost to be passed on to consumers.

• $5b - Value of online purchases in 2013
• $2.5b: Value of overseas online purchases
• $200m-300m: Estimate of lost GST and duty on foreign online purchases

- Retailers Association estimates