Banks say no to being GST collectors

July 13th, 2013 at 7:00 am by David Farrar

Interest writes:

Banks wouldn’t want to be involved in attempting to collect on goods bought overseas for less than $400 because doing so would be “incredibly complex”, Kirk Hope the CEO of bank lobby group the New Zealand Bankers’ Association (NZBA) says.

Hope told interest.co.nz that although he had some sympathy with the New Zealand Retailers’ Association argument about a level playing field, banks weren’t keen on being involved. His comments come after it emerged that three government departments¬†have set up a joint working party¬†to see whether GST could be levied on overseas purchases worth less than $400.

“We wouldn’t want to be involved in the collection of it because it’s very complex both to implement and administratively,” Hope said.

“And I think (Customs Minister Maurice) Williamson has pointed out that in fact no other jurisdictions have figured out how to collect GST on online transactions because it’s not as easy as the Retailers’ Association would have you believe.”

Yep the Retailers need to harden up.

I don’t know anyone who decides to purchase online because of the GST difference. They buy online because it is convenient and/or available.

If the concern is the 15% GST provides an incentive for people to buy online, then the solution should be to lower GST!

Hope also said a problem for banks would be not actually knowing where their customers were.

“A customer may be in a foreign jurisdiction on holiday. We don’t know where they physically are so if the transaction is booked on their credit card in a foreign jurisdiction, are they there physically? Are they holidaying or have they just brought something from that jurisdiction?”

If my credit card company charged me 15% GST on a purchase and got it wrong, I’d want their blood.

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20 Responses to “Banks say no to being GST collectors”

  1. MT_Tinman (3,186 comments) says:

    The only reason I buy on-line internationally is if the goods are unavailable in NZ or they are significantly cheaper elsewhere.

    Recently I purchased something that was available in NZ for $245 (min) for US$70.

    Even with shipping it was well over $100 cheaper (with GST it still would have been so).

    NZ retailers need to awake to the fact that NZers can now investigate and access goods worldwide and are no longer an easy form of revenue for those retailers.

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  2. martinh (1,257 comments) says:

    @MT
    Well your comment suggests that gst should still be added.

    If Maurice cant come up with how to do it in his own head i bet someone else can.
    An account people keep with customs could work, the money being deducted as goods cleared

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  3. peterwn (3,271 comments) says:

    Simply do away with GST. The basic formula to consider is: income = consumption + savings/ investment, with tax on the income and consumption aspects. So eliminate consumption tax and increase income tax. GST also gives some indirect savings/ investment incentive, so tax concessions on savings/ investment could be increased. A variation is a selective consumption tax on items where tax cannot be bypassed by consumer imports. The obvious one is energy, so a say 25% consumption tax could be imposed on electricity, gas and liquid fuels in lieu of GST. There could then be a seasonal welfare benefit supplement (adjusted by region and weather severity) to cover winter heating costs and this could be credited directly to utility accounts nominated by the beneficiary.

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  4. burt (8,269 comments) says:

    DPF

    If the concern is the 15% GST provides an incentive for people to buy online, then the solution should be to lower GST!

    OK, so not long ago you were defending the lift of GST to 15%. All sort of arguments went on around that…

    Now… are you taking the piss or what ? The problem is the local retailers are disadvantaged and the NZ is disadvantaged by the GST not being collected on the ‘goods’ and ‘services’ being purchased offshore online. Sure that’s an issue – but lower GST… what problem are we trying to solve by doing that ?

    What should be considered however is that the lack of GST with online purchases actually makes GST more regressive than it already is by design. So with that in mind lowering (or removing) GST might resolve that.

    But I guess it’s all going to be OK, the new GCSB bill will probably enable the gummit to snoop online purchases and send GST invoices to the purchasers. Whoever has got all the information about online purchases can orchestrate the GST collection – it’s not the banks !

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  5. vibenna (305 comments) says:

    The answer is to introduce a 2% tax on credit card transactions. That would capture not just GST from online good retailers, but shore up the tax base against avoidance by service companies like google and apple. In return, there could be a 2% reduction in income tax so consumers are no worse off.

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  6. Sonny Blount (1,782 comments) says:

    And as soon as Labout got in vibenna they will be increasing income taxes by 5%. Same thing happens with GST increases.

    You can’t permanently offset other taxes by lowering income taxes unless you can prevent future governments changing income tax rates.

    The priority for the tax system should be clarity of total cost. I would prefer 1 point of collection, and for the taxpayer to be give the money to the government rather than ‘invisibly’ collected through PAYE.

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  7. swan (665 comments) says:

    Rather than get others involved, the IRD could simply have customers pay via the IRD website. Do a few random checks and levy fines. Isn’t that the way the rest of the tax system works?

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  8. Paulus (2,627 comments) says:

    Watch carefully – Labour will have to increase GST to 17.5% anyway to pay everybody, except the rich !

    Many of their best supporters (if they have any) of Labour are in the top tax brackets anyway, [particularly those in the public service. Look at some of the senior salaries (not the top ones).

    In our council over 22% of the employees (not the contractor mates) are paid in excess of $100,000 per annum.

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  9. chris (647 comments) says:

    The answer is to introduce a 2% tax on credit card transactions

    And watch everyone (like me) who pays for everything with their credit card to earn rewards points (and pays it in full each month) to stop using their credit card to pay for everything. And there are ways of paying overseas transactions without a credit card, to also avoid said tax. I don’t necessarily agree with it, but if you’re going to do a transaction tax it should be on all transactions, not limited to credit cards, in order to make sure people can’t avoid it, other than reverting to just being paid and paying in cash.

    You always get people working out how much they can earn from taxation using current figures, and they never take into account that the way people go about their business will change in order to pay less tax. I seem to remember something similar happened in Sweden when they introduced that transaction tax: everyone moved their currency/etc trades outside the country and they made almost nothing.

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  10. beautox (422 comments) says:

    No the solution is for governments to spend less of our money, and reduce taxes across the board.

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  11. leftyliberal (651 comments) says:

    The most important thing the government can do with the tax system is simplify it so that there’s fewer ways to game the system. e.g. when the last Labour government increased the top tax rate in 2001 there was a large increase in dividend payouts in 2000 due to the company rate being lower. i.e. the total tax take to the government increased, but this was mainly due to salaried folk in the 70-95% percentile of incomes being taxed more, rather than the very rich who are more able to take advantage of lower rates by restructuring.

    Ideally all income should be taxed at the same rate to avoid this. This can still be progressive if one wants, though I personally prefer a constant credit with a single flat rate for all positive earnings from there on. Further, all tax distortions (WFF for example) should either be removed (with a corresponding reduction in tax rates) or simplified and applied universally.

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  12. orewa1 (410 comments) says:

    Yes, retailers can fairly argue that the tax system is discriminatory. But they risk pissing off the public if they argue too hard. Retail and on-line shopping both have their place; retailers need to promote the benefits of traditional trading and win back market share. The tax issue is simply incapable of resolution, and its time we put an army of bureaucrats to work on more productive things.

    What retailers should be arguing politicians for, and getting, is a promise that GST will never exceed the current 15%.

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  13. vibenna (305 comments) says:

    Chris said:

    “And watch everyone (like me) who pays for everything with their credit card to earn rewards points (and pays it in full each month) to stop using their credit card to pay for everything. And there are ways of paying overseas transactions without a credit card, to also avoid said tax.”

    Yes, very true. But reduced credit card expenditure is no bad thing. Also the tax would be less than the transaction costs of using alternative methods of payment (which might be $25 per transaction). So it would likely capture consumer payments for items up to a few thousand, but not large company payments, made by other means.

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  14. Tom Jackson (2,553 comments) says:

    I buy online for this reason.

    I paid $62 for “The Last of Us” and it is $110 in my local game store. Fuck GST.

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  15. tvb (4,421 comments) says:

    They could hold these online purchases on bond at the local post office and you could pay GST on that. Maurice Wiiliamson who is far brighter than that fool Todd McLay understands that de minimis applies. But McLay son of Roger would not understand that concept.

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  16. chris (647 comments) says:

    But reduced credit card expenditure is no bad thing

    For those people who use their credit card for credit, perhaps, but I use mine for a) convenience, b) no transaction fees and c) I get rewards. I pay the full balance each month, so it’s not really credit card expenditure at all.

    Also the tax would be less than the transaction costs of using alternative methods of payment (which might be $25 per transaction). So it would likely capture consumer payments for items up to a few thousand

    If I pay a $300 supermarket bill from my cheque account, it costs me whatever the transaction fee is, something like 25c. I currently pay for my supermarket bill with my credit card, which doesn’t cost me anything in transaction fees, and I get $1 back for every $100 I spend from my rewards scheme.

    Under your 2% scenario, paying by credit card would cost me $3 ($6 in tax, $3 back in rewards) whereas paying from my cheque account would cost 25c. So guess what? I’d stop paying by credit card and the Government wouldn’t make that 2% tax from me.

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  17. Inky_the_Red (759 comments) says:

    I agree GST is bad – get rid of it?

    Or is it good for people to pay it on good purchased in NZ but somehow bad for those who buy small valued imports?

    I really can’t see how Act or Labour can oppose GST on imports but be happy to see GST on NZ sourced goods. The logic makes no sense.

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  18. simpleton1 (226 comments) says:

    Just enjoy how the Canadian system works, as anything of value that is posted there, even if you believe that the stamps covered the cost will not be delivered unless the receiver pays an additional fee/cost/tax/customs.
    http://www.canadapost.ca/cpo/mc/aboutus/news/announcements/customsfee.jsf.
    Some of the costs more often than match the price of the article sent

    A few years ago I found there was major problems/costs/hassles/scams with the Canadian Postal system.

    I think it will be great way to for NZ Post to be revitalized. Also our unemployment will drop as NZ post will need a lot of staff for this administration and bonded ware houses could be built, and more vans for delivery and if not paid by receiver will be returned to ware house, which will be by rule, never the one that you inquire at to make final payment for goods to be received. :-) And of course you to pay all goods extra costs and fees.

    Just good for a laugh at a bureaucratic USA/Canadian border experience.
    http://blog.openbeamusa.com/2012/07/31/stuck-in-customs-how-not-to-import-goods-into-a-neighboring-country/

    Of course if you are a major importer and employ http://business.financialpost.com/2012/07/25/ernst-young-insight-trouble-at-the-border-the-top-10-customs-related-issues-facing-canadian-importers/?__lsa=de01-afe2 I am sure that you will find many costs can be discounted. :-)
    Some say that the small business / house holder subsidizes the lower/costs/fees and even taxes for the large companies.

    It is a pity that I can not find the sites of a few years ago that made you realize just how much a night mare it could be to buy in the USA or even world wide and send to Canada. You will realize that it becomes more of a racket, than just collecting a bit of tax.

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  19. campit (467 comments) says:

    How come NZ retailers don’t just set up an online presence in, say, the Cook Islands or even Australia for NZ customers to purchase from?

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  20. Ed Snack (1,872 comments) says:

    So as I suggested earlier, make all overseas payments subject to GST, with a claim back system for exempt transactions. Fucks up all the clever schemes pretty well except taking cash out, so ban that…but why give the bastards ideas. Not that I’m sure it hasn’t already been considered, and I wouldn’t be surprised to see that it’s already in the Green’s manifesto.

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