Not virtually, it is impossible

Maurice Williamson has seen sense and declared that it would be almost impossible to accede to the whacky demands of retailers who are insisting that GST be levied against all online transactions.

Customs Minister Maurice Williamson says it would be virtually impossible to charge GST on items being bought online, an idea currently being explored by government officials.

The Inland Revenue Department and Customs have set up a working group to establish whether 15 per cent GST should be charged on items bought online which cost less than $400. Other countries, including Australian and the United Kingdom, are currently grappling with how to introduce such a system.

It has the support of New Zealand retailers, who say it would create a level playing field with the booming online market, but Williamson could not see how it would work. 

“Because I’ve got a technology background I think … it’s just about going to be impossible to do,” he told Radio New Zealand.

“It would be great if we had some easy mechanism to charge it against credit card transactions but that would mean you’d have to identify whether the person was actually in New Zealand at the time.

“There will be all sorts of digital payment systems in the future like digital money and PayPal and digital coin payment systems – how would you track those?”

If retailers want to be competitive against online retailers overseas then it is simple…they have to offer the same goods and services at the same price points with the same choice, but the sad reality is they won’t and don’t.

Take the sporting goods area…there is this persistence of exclusive distributorships, where retailers have to deal with the middle man who owns the “country rights” to a particular product. This could be boots, rifles, packs…almost anything. The middle man gets paid and the retailer needs to get paid too but the consequence of this outmoded business model is that something like a good pair of boots can cost over $175 for the same item that can be bought via Cabelas or Bass Pro. Even when GST and shipping is paid it is still cheaper.

Almost everything that we have in New Zealand is dearer than elsewhere and more than the cost of freight too…people can literally let there fingers do the walking and they are y shopping offshore.

Stopping it and erecting walls to protect outmoded and old-fashioned business models would be electorally stupid, it would National’s light bulb moment.

  • XM16E1

    “it would National’s light bulb moment.” This.

  • cows4me

    Impossible to do? I think Maurice knows full well that if this government was to somehow implement a GST on international internet transactions a shit storm would ensue. I remember dear Maurice telling the people of NZ that removing GST on food would just be a too hard an exercise. This may also be another case of previous policies biting them on the arse.

  • Reason1

    I think GST on goods bought online should be looked at. It is a growing issue as everytime someone buys something from overseas GST in NZ is not paid or lost. Why should these transactions be exempt? Just because it is difficult to capture does not mean we give up.

    Retailers in NZ provide a service so you can look, assess and try on products. They have to pay GST, wages and all NZ compliance costs and warranties. Of course this extra service costs money. NZ retailers do not get access to the same pricing as big wholesalers overseas as we are a small market. We should not stop buying from overseas, but it should be subject to GST.

    Retailers in NZ will have to lift their game to compete by offering better service and access to latest products at competitive pricing.

    How cheap are running shoes from overseas that do not fit properly and cause injuries?

    • Michael

      Do they make Nike’s different overseas? Oh wait Nike’s are made overseas.

    • sarah

      The goods are bought overseas not in nz. Why should I have to pay gst on that. Nz retailers need to get real. I will not pay for overpriced goods and most of my clothes I buy from a site unavailable here. I buy online in nz ….briscoes, countdown. Don’t want to be made to buy overpriced stuff.

    • Bunswalla

      So if you don’t use that service to look, assess and try on products i.e. you don’t visit a store, why the hell should you pay the same as retail?

    • Bad__Cat

      “How cheap are running shoes from overseas that do not fit properly and cause injuries?”

      Funny you should say that! I buy direct from the US because NZ retailers and franchise holders don’t stock sizes that fit me. Ditto with clothes

  • Dave

    I believe it should be implemented for all transactions over say.. $50. Think of all the businesses that trade without GST, and then the impact on those that legally trade and pay their taxes. there are bricks and mortar retailers that now demand a deposit from customers before they try on ski boots etc. These businesses have had to invest thousands a month in rent and staff costs, and their online offshore clients don’t afford their clients the opportunity of trying before they buy, and then they skip the countries GST, in effect meaning they get a 15% government bonus.

    We would not accept asking the local dairy or service station to skip the GST, why on overseas purchases ?

  • blokeintakapuna

    Bricks & mortar retailers are facing very similar issues to the newspapers and MSM in general. Technology and rapid advances have over-taken their business model and left them caught short – with the masses electing to find a “work around” or shop elsewhere rather than electing to pay a higher price.
    Not sure what the answer is, but creating *another* government department to try and *capture* GST on offshore products won’t work and will only eventually add additional costs to the bricks & mortar retailers to help pay for it.
    The only constant is change. Evolve or become extinct.

  • Shoreboy57

    Shut down quicker than a man-ban. Nothing to see here, move along

  • Freddy

    I call b.s on this one.
    All goods imported are required to furnish the transaction invoice upon importation, for Customs clearance, this includes these types of purchases, which usually arrive by one of the big courier companies or mail. It is a very simple (IT) transaction to collect the GST and duty on these present clearances . The only real impost aside from the poor consumer paying his taxes, is the burden on the aforementioned courier companies who would have to do proper clearances and provide proper invoices.
    The sheer size of what’s happening here is not to be dismissed. At Xmas time the airlines have massive backlogs of this type of cargo, the loss of revenue, huge. Is it right that all this shit is airfreighted in rather than seafreighted by the retailers?
    Perhaps Maurice is worried about where his rugby tickets will come from should he hassle the courier companies with this burden.

  • SJ00

    Bullshit. It would be easy to do. I’m an online retailer in NZ, and pay GST for all purchases that go through my store. Guess the common thing that all overseas purchases have. Freight. They all have to fly or sail into the country (unless its bought whilst on holiday, but I don’t think thats the point of this story). So, check all items coming in (declaration on the outside, and randomly check as well), anything valued over $400, whack them with GST. Don’t pay? Don’t get your goods.

    I can tell you now, I have a markup of 10% on my goods (computer gear), which isn’t excessive and barely keeps the costs covered yet alone making any money. I pay GST to the suppliers, who may well jack up the price, but the biggest cost to get goods to this flea arse end of the world, is freight. A big box about 20-30kgs is about $300US via DHL (I also import goods for sale here). Generally I can cut a few dollars off an NZ suppliers price, but if the NZ supplier has bought a container of stuff, they can get some sharp prices. Mind you the computer industry has one of the lowest markups and most competitive markets.

    Its not actually fair for NZ retailers. Having said that, I also get stuff from overseas, but that is due to the range over there, and not available here.

    • SJ00

      Further, DHL actually make me pay GST before they release the order to me. There is the answer. Who ever is bringing it in (DHL, Post, Fed Ex…) require GST before releasing the order. In fact all 3 do this to me already (I import from all over the world with all sorts of freight forwarders).

    • Michael

      range is a big driver for my shopping over seas. NZ market space for bespoke items is pretty small.

      That said, I can buy Levi 501’s for $45 USD (or about $60 NZD)but have to pay $130 – $160 NZ here.. So tax aside, kiwi retails don’t have the buying power to command a cheaper wholesale price, that’s my guess anyways.

      • SJ00

        Agreed there are some retailers that are taking the piss. you can actually get levis cheaper than that, 2 for $40 US (I was just over there). And it therefore makes sense to source things overseas. But even if you paid GST on that, at most its around $15 per $100, you still come out ahead (in the case of the levis).

    • PlanetOrphan

      Inspect every parcel coming into the country for GST infringement , u r out of ur mind bud :-)

      • SJ00

        But DHL and Fed Ex to it to all of mine already, talking orders of $5k to $10k. And I pay GST on those before they get to me. It really isn’t that hard. Look at the declaration on the outside, randomly check some of those and stiff everyone for over $400. I’m not expecting them to open small parcels where a book has been sent from Amazon for $15. If they aren’t looking at the declarations on the outside, then thats the fault in the system. I realise thousands of things come in, but if there is money to made (collect GST etc) then get extra staff.

        • PlanetOrphan

          For a big operation like Amazon it’s easy, but how many back yard operators running on eBay are gonna worry about declarations ? , just bubble wrap it and post it ….

          They just call it second hand etc.

          Unless you have a smart-scan capability you wouldn’t even catch 1% of the imports.

          You could do the same bud, just get someone to actually buy the book in the US and send it on, second-hand book. Of course it’s a rort but a legal one.

          • SJ00

            Yeah but the back yard operators still need to declare whats on the goods. Go to the Post Shop and send something overseas and you have to write the value on the front and whats in it, no dangerous goods etc. You can’t send something with out that. And fine some things are going to slip through, but you catch some and ping the end user, and the system starts getting results. If you declare something as second hand, and its not, pinged.

            The reason it ‘can’t’ be done is due to cost, having staff checking things. Every parcel can be checked, if you throw enough resources at it. Imagine what else would be caught coming in, drugs, counterfeit shit, etc.

            And believe me, I don’t want to pay GST on the stuff I sometimes get, so I’m all for no GST, but as a retailer as well, where I know people are avoiding us and going overseas to save a few dollars, I think it should be a level playing field. I import a few brands that no one else does, and I’ve had people who I know didn’t buy it off me, come to me to get it replaced. Try dealing with a warranty issue if you buy something overseas. I have flat out refused to deal with peoples warranties that have bypassed me. You took the risk for saving some money, I also take a risk in buying stock to sell, you deal with the fallout when it fails.

          • PlanetOrphan

            Fair enough , well said.

  • Michael

    this a bit of smoke and mirrors. 15% tax is not the difference in costs between say Amazon and NZ bookstores.

    I have landed books from Amazon using their 2 – 3 days shipping and it’s still been 50% less that Whitcouls or similar.

    I would gladly support a kiwi business, but I refuse to go broke doing so.

    • dyannt

      I wonder how they would charge GST on the 99c Kindle books I buy?

  • rightoverlabour

    We are getting ripped off here in New Zealand and we have much less choice. To the retailers that are suffering, tough, its a dog eat dog world out there. Just look at the price of toys here compared to the States…

  • JimmyMatamata

    As far as I am aware Australia have a $1000 de minimis compared to our $400. Mkaes importing purchasing goods online a lot better for Aussies.

  • mark

    The issue for NZ companies (and I am one) is that the ticket is clipped all the way through. To clear imported items through Customs we have to have a forwarding agent as Custom won’t let us do it ourselves. So every shipment we bring in starts with NZ costs of $130-odd dollars. Add the freight costs and this means we have to add around 30% to the cost the manufacturer charges us (which is sometimes less than the internet price – go figure!) to break even. We then pay GST on the goods value and the freight costs (and yes the GST is claimable back from IRD but the added paperwork takes time that someone has to be paid to do).

    We also have to content with overseas manufacturers who will supply Joe Blogs via their on-line order, but who make us go through an appointed ‘agent’ of theirs in NZ. This clips the ticket again – in our experience if we have to go through an appointed ‘agent’ it adds at least a further 40% to the product.

    Generally we can land an imported product for around 75% of the on-line price. If we have to go through a local ‘agent’ our costs are roughly 110% of the on-line cost. We then have to make a mark-up to cover our costs, plus add 15% GST. If we mark-up at 20% the price we need to sell at is around 150% of the on-line price

    I will agree that there are too many NZ companies who do price gouge, especially those that are sole agents for overseas manufactures, and this needs to be addressed through consumer pressure, but there others like ourselves, that battle to make a living, but keep forging ahead as best we can because we are passionate about the business we are in.

    Would we be having the same discussion if GST threshold was being raised to $500 dollars I think not. Give Kiwi companies a fair go, and if there is price gouging boycott those involved – its called consumer power!

  • johnbronkhorst

    Definitely don’t support this one!!
    If National want to know whether or not to do it.
    labour support it….enough said….don’t do it!

  • Liberty

    Maurice Williamson is talking twaddle .
    The state forces the corner dairy to collect the vile gst tax on a 20c lollipop
    Yet Maurice Williamson claims it is too difficult to collect from online overseas purchase.
    Every parcel has to go past a state agency and with all the technology available to the state It can’t clip the tick by 15% what a load of crap.
    Every retailer has to comply to this vile tax. Yet the state lets online purchases be exempt because it is to difficult
    Abolish the vile tax or Mr Williamson should get of his arse and charge the gst on all purchases.
    It is not that difficult.

  • LesleyNZ

    The Goods and Service are not being bought in New Zealand so GST is irrelevant. Glad common-sense has prevailed.

  • BR

    This is nonsense. Retailers are nothing but middlemen. Just because an item is bought on line does not mean that there is no longer a middleman, it just means that the man who stands behind a counter has been replaced by the man who drives a courier van.

    Both pay tax.

    Bill.

  • Mr_V4

    I wonder if a financial transaction tax would be a good substitute. Scrap GST completely it is an antiquity in a world where the supplier could be overseas and sell online. Have NZ banks and any financial institutions serving NZ to charge a very small fee on every transaction, it would only need to be a fraction of 1%. It would also capture all manner of speculative activity such as currency trading etc. I don’t see why ‘goods and services’ should be targeted at such a high rate

    The main issue with a FTT is people structuring their affairs to avoid the tax, by say doing the transaction entirely at an overseas bank, and hence out of the jurisdiction. However surely this can be made illegal. If the FTT was successul you could look at removing business taxes/income taxes as well which would help maintain competitiveness.

  • TreeCrusher

    There is no way this will ever work. There are already companies overseas specifically set up to dodge GST and other taxes. One can buy things in the US for $2k-$3k, have it sent to one of these companies, they will open it, use it a little and then send it to you as a gift or with a much lower declared value because it is now second hand.

    “If you can’t beat ‘em join ‘em”. These bricks and mortar boys need to get real and join the game. Have a look at chain reaction cycles. They didn’t have a little whinge about losing out to the online boys, they joined in and are now much larger than they ever could’ve imagined. Why not set your business up online and target Aussie? People need to think global now, any retailer of easily freight-able goods that is only targeting the NZ market is going to loose in the long run.

    This is just one more example of outdated models trying to put the genie back in the bottle….did I hear somebody say music industry, how’s that working out for them?

  • Mangi Nambis

    It’s already in place. I buy my work shirts from the UK as the quality and price are far better than what I get here. One shipment was held up by customs where a duty and GST component was added which I had to pay to have it released. One shipment out of 20 mind so I’m not complaining and it was still far cheaper than shirts here

  • bobby

    Your example of sporting goods is a great one. I have bought outdoor wear previously – couriered to my front door from the US and still saved tons of money. On one jacket I think I paid all up about $250 for a jacket which costs $550 in NZ. I had gone to two retailers selling that model and explained I how much I could get it for and if they’d make some attempt to bridge the gap as I’d like to support NZ retailers if possible.

    The best offer at $500 which was still double the price. their claim was the wholesale price to them was over $400 which I struggle to comprehend. Either retailers or the local agents are taking the piss out of NZers and have done so for ages.

    Try buying the latest Nike running shoes online – 40% cheaper is pretty much a blanket online rate compared to NZ shops.

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