Should consumers buying online goods from overseas pay GST on their purchases? The Press reports that IRD is examining options.
The status quo is that purchases from overseas do not attract GST where the cost of administering and collecting the tax exceeds the tax collected. So purchases of $400 or less are untaxed: the fixed cost of collecting the tax must then be about $60.
The New Zealand retailers hate that Kiwis like importing things from abroad, but it's hardly the GST-savings that are driving things. You can fairly easily save upwards of 50% by using UK bookseller BookDepository rather than Kiwi outlets; fixed costs here matter a lot more than the 15% GST difference.
Were there some costless technology for imposing GST on goods coming in at the border, then New Zealand should do it. The more we can rely on consumption taxes, the less we have to rely on income taxes. If collection technologies change, then the threshold too should change.
So there is nothing objectionable about IRD's continuing to keep an eye on the optimal GST collection threshold and on things that might reduce collection costs.
But I do hope that IRD is weighing the costs of collection falling on all parties, not just those falling on IRD. When a package is held at the border pending GST collection, it takes time and hassle to bill people, and packages get delayed. All of that is off-budget from IRD's perspective, but they're real costs too that should count in the calculus. And, they're particularly pernicious costs: the random-draw delays that can obtain if goods get held up waiting for GST collection can put people off online shopping from abroad entirely. That's likely what the Retailers Guild is hoping for.
I expect that having the credit card companies or foreign retailers act on IRD's behalf would prove rather intractable. I would also be a bit surprised if collection technologies have advanced sufficiently to make it worthwhile to collect at lower than a $400 threshold, but perhaps IRD will surprise me.
