Tax on online shopping doomed to fail - Consumer

Updated at 7:34 pm on 11 July 2013

Consumer New Zealand says introducing a system to tax all goods bought from overseas websites will be fraught with difficulties and is doomed to fail.

Goods costing under $400 are currently exempt from GST, but the Inland Revenue Department and Customs are looking at ways of taxing smaller purchases.

One idea being floated is to ask banks to charge shoppers the GST when the transaction appears on a credit card bill.

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

Chief executive Sue Chetwin said she is also concerned that banks would charge a fee for collecting the tax, which she says would be another cost to be passed on to consumers.

Booksellers New Zealand chief executive Lincoln Gould said the initiative would be good for small businesses trying to compete on a global playing field. But Ms Chetwin said retailers should be thinking about other models to stay competitive instead of pushing for extra taxes on consumers.

Customs Minister Maurice Williamson told Radio New Zealand's Morning Report programme that the scheme would have to be done without imposing hassle and cost on consumers.

With the way technology is moving, Mr Williamson said it would be very difficult to implement a tax successfully at present. He said other countries are also considering a tax, but no one is doing it successfully yet.

But the Retailers Association believes it would be easy to do in a small economy like New Zealand. Chief executive John Albertson said the Government is effectively subsidising offshore retailers by more than $200 million a year and the matter is too important to left in the "too hard basket".

Listen to Maurice Williamson on Morning Report ( 3 min 42 sec )

Listen to John Albertson on Morning Report ( 4 min 22 sec )

Complex issue

The Bankers Association believes it would be incredibly complex for the Government to successfully put a tax on items bought online from overseas sites.

Chief executive Kirk Hope said the fact there is yet to be a successful system elsewhere in the world means the IRD and Customs have a difficult task ahead.

Mr Hope said New Zealand's $400 threshold is quite low compared with Australia, where it is $A1000, and Australia has been unsuccessful in its attempts to apply tax to goods cheaper than its threshold.

KPMG's head of GST practice Peter Scott said he understands why Revenue Minister Todd McClay wants to level the playing field for retailers in New Zealand.

He said as online shopping becomes more popular, adding GST to goods purchased offshore via the web would become more difficult.

Mr Scott said data products such as movies and music bought online and downloaded don't need to be shipped, are not currently taxed, and will likely pose another question for the IRD.

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