Consumer backlash over GST proposal

Government investigates GST on online goods

TOM PULLAR-STRECKER AND JAZIAL CROSSLEY
Last updated 10:08 11/07/2013
online shopping
MAARTEN HOLL/ Fairfax NZ
SHOPPING ONLINE: Izzi Brown buys many goods online and would be disappointed if GST was added to the price of her purchases.

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Customs Minister Maurice Williamson has begun playing down the likelihood of the Government ensuring GST is paid on all international online shopping purchases after a backlash from consumers.

The Government is looking at whether it could ask credit card companies to collect GST on goods, services and digital products such as music and games that consumers can import or download tax-free from overseas.

Williamson gave mixed messages during a radio interview today, saying that while consumers could not complain if an easy way to collect the tax was found, and he did not want to "prejudice the outcome" of officials' investigations, it was going to be "just about impossible to do".

Revenue Minister Todd McClay said yesterday that the issue was a "priority" for Inland Revenue, which was leading policy development in the area, while Customs' role was to consider how any extended tax could be collected.

He said a joint working party had been set up by Inland Revenue and Customs. He expected a discussion paper would be published this year, and he promised retailers and consumers would then be able to have their say.

Retailers would be delighted with the working party, New Zealand Retailers Association chief executive John Albertson said.

"It is not about a grab for domestic retailers. It is all about fairness and equity," he said.

More than 200 consumers took to Stuff to voice their concerns yesterday, with many arguing that GST-free overseas shopping was not the main reason Kiwi shops were often uncompetitive.

Albertson said at least $1 billion of goods were bought tax-free from overseas websites each year, not counting digital products such as e-books, software, music and films.

Ernst & Young tax specialist Iain Blakeley said people could import up to $60,000 worth of digital products and services each year without paying GST.

Albertson said GST ought to be charged on all physical shipments valued at more than $400 under the current Customs regime, but overseas retailers were often helping their customers evade tax by understating the value of items so they fell below the threshold.

"In this case it wouldn't have made any difference, but one of my own staff bought two shirts from Australia costing $80 each, and the packaging said it was valued at $25," he said.

"You get other offshore operators sending stuff marked as 'samples only' and all that nonsense."

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The Government has so far resisted lowering the $400 threshold because of the cost of collecting GST on the millions of parcels and packages coming into the country. A lower threshold applies to some goods that still attract duty, such as clothes, shoes and jewellery.

Williamson said one of the options the working party would consider was whether Customs could ask credit card companies to add GST on overseas purchases to customers' credit card bills.

Consumers might still be able to avoid GST by shopping on the internet using overseas payment intermediaries such as Paypal, or by setting up bank accounts overseas, he said.

Albertson said that even Paypal would probably need to face up to a new role as an international tax collector.

"Paypal are going to come up against this all around the world, so they may as well get used to the idea," he said.

Blakeley said there was a "groundswell of opinion" internationally that the issue needed to be tackled.

"Mayors in the United States are concerned that just the loss of inter-state taxes from online shopping is costing their cities and counties billions of dollars," he said.

"It is a huge issue and there has got to be a technology solution." Williamson said charging GST on lower-valued imports might not be popular, but the growth in overseas online shopping would become harder for the Government to ignore.

"People are buying online left, right and centre. Retailers are getting cross," he said.

"If you looked out the window in my street in Pakuranga five years ago at 7am you would have never seen a courier van. Now you always see a courier van."

McClay said the Government would act if it was right thing to do, even if that was unpopular.

Consumers should recognise that taxes needed to be levied one way or another. That meant that if they escaped paying GST on online shopping purchases, the burden would fall on them from elsewhere, he said.

CONSUMER REACTION

Wellington resident Hamish Girvan and his wife buys most clothes for themselves and their two children online. They also buy books and kitchen appliances through the internet.

"We used to live in the States, so we know what these things really cost," Mr Girvan said. "Even if GST was added on, it would still be way cheaper."

Izzi Brown does about 40 per cent of all her shopping online, mainly to access a better selection, especially if she wants something unique, such as a dress for a special occasion.

"I went and got my eyes tested the other day to get new glasses," she said. "The store I went to told me it'd take two weeks for the ones I chose from their store's small selection to arrive, so I went online, found the frames I wanted from a better selection and for a better price, and they'll be here in less time and all the way from the US. It's a no-brainer."

If GST was charged on all online purchases, she might think twice, but did not think it would significantly change her shopping behaviour.

"While I can understand the reasoning behind charging GST, I think it's a copout. Retailers have a cry about lower sales, but they need to move with the times, particularly given that they won't see the revenue generated by GST anyway."

Recent graduate Melissa Brenzinger buys clothes, cosmetics and tea bags online. If a tax was introduced on those purchases, she would "get fed up and move to a country where to spend isn't a taxed luxury", she said.

"I am paying GST on everything else ..."

- The Dominion Post

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