GST on online purchases

July 11th, 2013 at 11:00 am by David Farrar

Stuff reports:

Online shoppers face being chased down for on all goods, services and digital products bought from overseas.

A joint working party has been set up by Inland Revenue and Customs to investigate collecting GST on more personal imports.

Credit-card companies could be asked to collect the revenue, as could overseas payment intermediaries such as PayPal.

You could ask, but why would they? It would cost them money, and anger their customers to discover what they purchased has had 15% added to their bill.

The Government is also reviewing the threshold at which you have to pay GST on imports. It is currently $400, which means they only collect GST if it is of $60 value or more. You may be able to lower that threshold slightly, but I suspect the costs of collection would be more than the revenue gained if they dropped it by much. In Australia I think the threshold is $1,000.

The other issue is that many online retailers, especially in Asian countries, automatically declare the values of the goods they are shipping to be $20. Short of opening every letter and parcel and getting the contents valued, there is again little that can be done.

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49 Responses to “GST on online purchases”

  1. Manolo (13,401 comments) says:

    Sheer rapacity and greed for more revenue. That’s what this is.

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  2. shoreboy57 (132 comments) says:

    Understand retailers finding it tough but even if a means could be found to deal with GST it wont resolve traditional bricks & mortar being unable to compete on price, choice, 24/7 convenience. Looking back there wouldn’t be a single online purchase I’ve made in last 3 years where my purchase decision would have switched to local if GST applied Need to stop bleating and address their business model on how to compete

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  3. Redbaiter (7,645 comments) says:

    “The Government is also reviewing the threshold at which you have to pay GST on imports.”

    That’s the National Government of course. Led by John Key.

    Once again we are forced to deal with massive intrusion from the state when we just want to go about our business.

    The collection costs of this idiotic and greedy grab will be unsustainable.

    The IRD needs to be abolished and taxes paid the same way as rates.

    One tax/ one cheque per annum per voter. Based on the cost of government divided by the number of taxpayers.

    End of story.

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  4. Harriet (4,534 comments) says:

    “…In Australia I think the threshold is $1,000…”

    Yes it is.

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  5. CJPhoto (218 comments) says:

    “You could ask, but why would they?”

    You could force them too, so they have too.

    The issue with getting credit card companies to do it is:
    - how do they determine if the good or service is being consumed in NZ (holidays, gifts etc)
    - how do you capture other payment providers, especially those without a presence in NZ (ie. not subject to NZ law)

    I think people(ie retailers) need to stop moaning as no one has sympathy for them. The issue is NZ has a braod based consumption tax with very few exemptions and exempting foreign purchases should not be one of them (unless compliance exceeds the benefit). The threashold is set at $400 for this reason.

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  6. tas (596 comments) says:

    Implementing GST on overseas purchases is all but impossible. Particularly as you may be paying sales tax in another country as well. It puts NZ retailers at a disadvantage, because sales taxes are often lower overseas. Perhaps the solution is to lower GST.

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  7. Redbaiter (7,645 comments) says:

    “Revenue Minister Todd McClay expects a discussion paper to be published this year”

    No surprises that this drooling idiot is behind it.

    Another Nat wanker who should be in the Labour party.

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  8. tas (596 comments) says:

    CJPhoto (134) Says:
    July 11th, 2013 at 11:10 am
    “You could ask, but why would they?”

    You could force them too, so they have too.

    Nope. How can the NZ govt compel a US or Chinese company? The only solution is to get the US/Chinese govts to do it for us. And they are probably not willing to do that.

    The NZ govt would have to inspect every package coming into the country to enforce this.

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  9. Harriet (4,534 comments) says:

    Where the Big Porn parties of Labour and National are concerned, ‘user pays taxes’ is enforced on private transactions like Genghis Kahn enforced rape on the female masses!

    But where public transactions occure – the Big Porn parties of Labour and National take an arbitary view – the more you recieve of public services, then likelyhood that the less you pay, unless, maybe, you have more money than some others who, maybe, use those services too, or, maybe, the services differ somewhat than other services, that, maybe, are used less or more, than, maybe, that of some other persons.

    I’m with Red:

    One tax/ one cheque per annum per voter. Based on the cost of government divided by the number of taxpayers.

    End of story.

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  10. unaha-closp (1,117 comments) says:

    Nope. How can the NZ govt compel a US or Chinese company? The only solution is to get the US/Chinese govts to do it for us. And they are probably not willing to do that.

    They mean to force the credit card companies to comply, not the overseas retailers.

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  11. Ashley Schaeffer (413 comments) says:

    If they can’t compel payment intermediaries such as PayPal then it’s all going to come to naught. I use PayPal a lot, but if PayPal tries to start charging me GST, I’ll use another overseas intermediary that doesn’t. And others will spring up fast if an opportunity exists to one-up PayPal.

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  12. CJPhoto (218 comments) says:

    Tas : “Nope. How can the NZ govt compel a US or Chinese company? ”

    Mastercard and Visa have operations in NZ so you can compel them with NZ law. My guess is there profits in NZ are big enough that they wouldn’t boycot NZ. As I said in my post, companies with no operations in NZ are not subject to NZ law and even if they were, you couldn’t complete them since they aren’t in NZ.

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  13. tas (596 comments) says:

    Credit card companies would not be happy with that and nor would their customers. And it is easily circumvented. Also if you are actually overseas, then your NZ credit card needs to know that and stop charging you sales tax.

    Trying to charge GST on overseas purchases is a losing battle, as you will be constantly competing with technology and imposing significant compliance costs.

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  14. dime (9,473 comments) says:

    It will get a touch easier for retailers as the dollar weakens. But really, GST isnt the answer.

    Retailers need to offer a better service/ experience. its the only way.

    Move into areas that aren’t just commodities. Why would anyone buy a pair of levis in NZ? ya know your size, buy them off ebay for a third of the price.

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  15. PaulP (142 comments) says:

    A minor correction on the discussion around this.

    The threshold is NZ$400 INCLUDING FREIGHT.

    So even more complicated – what if you buy the good from one supplier for less than NZ$400 and pay another company to freight it to you. Even the credit card company or paypal wouldn’t pick that up.

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  16. labrator (1,750 comments) says:

    If they want to lower the import threshold they need to make the “customs fee” fairer. At the moment it’s an additional $40+ dollars, sometimes as much as the GST depending on the courier company.

    The threshold is NZ$400 INCLUDING FREIGHT.

    This also irks me, paying GST on a foreign service…

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  17. flipper (3,595 comments) says:

    This is a classic vested interest campaign.
    Two years ago Australian retailers, headed then by Harvey Norman no less, started a campaign to lower the 1000 threshold.
    The media gutted him and others like David Jones, unmercifully. Norman finally backed off when the media disclosed that Harvey Norman was under pressure on sales of electronic goods because the $1000 limit covered many, many items that he would otherwise sell.

    The NZ campaign is simply self serving, and has no. taxpayer benefits in view/sight.

    Maurice Williamson is talking sense. The only issue I have with the Government on this is that the bureaucrats are being permitted to waste time and money on a working party. Wake up JK et al. Tell them all to bugger off.

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  18. Colville (2,085 comments) says:

    Can someone tell me why shoes are so cheap ex USA compared to here?

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  19. rouppe (919 comments) says:

    Case in point. I want to buy a Sonos Playbar. Cost in NZ according to pricespy is $1479.89. You can only get it through a couple of retailers. Interestingly JB Hi-Fi in NZ has the Sonos Play:5 and Play:3 but can’t get the Playbar.

    However JB in Australia do have the Playbar. Their advertised price is AUD1097 but they’ve agreed to sell it to me for AUD950. I effected the TT this morning. I’m going to Cairns in a month so I’ll pick it up then.

    In addition I will be able to claim Australian GST as a refund on the way back out. This takes the effective price to AUD855. At the exchange rate I was charged today this is NZ$1003.52.

    As an international traveler I get a $700 concession on goods brought back in to NZ, so the GST I am liable for is 15% of $303.52 which is $45.52 which means they won’t charge it.

    I have acquired something that costs $1479.89 for $1003.52. A $476.37 or 32% saving.

    Even if I paid the Australian price, took off the Australian GST and put NZ GST on the entire price the cost would be $1154. Still a 22% saving. NZ retailers are not offering discounts on this product so why the hell wouldn’t I buy it offshore?

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  20. rouppe (919 comments) says:

    Colville

    No idea. A couple of years ago I looked at some Teva’s here, on sale. RRP was $289, the were on sale for $189. I went to Amazon and landed them in NZ for about $120.

    Someone is taking the piss here when it comes to shoes

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  21. Rick Rowling (801 comments) says:

    If we’re going to persevere with consumption tax, applying it to small directly imported goods as well is inevitable in the longer term.

    It’s not impossible to do, it just involves many transactions between many buyers and sellers. Well, that’s just what our increasing interconnectedness & processing power is really really good at.

    A decade or so ago it would have seemed “impossible” (i.e. too complex to be worth it) for a business like Amazon or The Book Depository to make millions of sales of low value items, shipped worldwide. The transaction costs would have been prohibitive for something as cheap as a kid’s book.

    Four decades ago it would have seemed impossible that the banks would be so automated and interconnected that no-one would need to cash a cheque each Friday, because everyone could just wave a plastic card in front of a terminal, and two banks and a credit card company would automatically update several balances, even at midnight on Sunday

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  22. peterwn (3,168 comments) says:

    Not just Asia. I ordered some ‘hard core’ electronics stuff from an outfit in New York (run by a young female geek with a MIT degree), and there was an invoice in an envelope attached to the package indicating very low ‘cost’ prices – far less than I paid – no doubt intended for countries with stiff import duty regimes. Anyway, NZ would benefit far more from this particular importing than the GST foregone as the geeks who buy this sort of stuff will greatly improve their technology skills and might even be tempted to study for an engineering degree.

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  23. Colville (2,085 comments) says:

    rouppe.
    I know its just weird. Running shoes are 1/2 – 1/3 the NZ price, tramping boots the same.

    Is there an import tax on shoes? anyone know?

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  24. Manolo (13,401 comments) says:

    Why does this stupid (and greedy) government give oxygen to this Customs and IRD “working party”?

    It should be nipped ion the bud, disbanded before even starts. Different colour, same shit: Labour and National are made of the same stuff!

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  25. dime (9,473 comments) says:

    Economies of scale do come into it.

    Eg I may import 500pcs of an item that cost $1.50US. If we were bigger and I could bring in 5000pcs I would be paying 80cents.

    BUT we do get ripped big time on things like shoes, books, audio equipment…

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  26. Colville (2,085 comments) says:

    hmmm..

    Ok i go to Amazon I can get a husky 450 chainsaw new for $315 US$ freight free anywhere in USA.

    Here is $839 plus $40 freight.

    So its 100% more here. ($315 US = $404 NZ)

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  27. dime (9,473 comments) says:

    colville – yeah its bullshit.

    Dime follows the stock market and was watching an interview with a clothing guy.

    He was openly bragging how they get a lot more money for a tommy hilfiger shirt in europe than they do in the US.

    The industry is changing. High pricing is coming to an end.

    The world is too small.

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  28. mikemikemikemike (312 comments) says:

    The only sympathy I have for retailers is that they have to purchase the stock, lease the real estate to display it, the staff to sell it etc etc….only for someone to go in, take advantage of that investment for free and then make the purchase elsewhere is where they are at a disadvantage. I think the big ticket items will always be ‘safe’ from this. It’s only the stores that sell things like shoes, books, stationery that are truly at risk – and any attachment of GST would be so minimal that it wouldn’t make much difference anyway.

    What they are really gunning for is a way to make internet purchases more expensive through legislation so that they don’t have to get wise themselves i.e: protectionism.

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  29. Neil (556 comments) says:

    Really the whole thing is about reintroducing tariffs to protect local retailers.I have a little sympathy for the retailers but we should remember that we live in a global world,the ability to shop from our computer.
    The GST would be a nightmare to collect,Williamson is correct.McClay is like a new school prefect showing off his new status as a minister. He will be made to look a wally.
    In my small town there is one bookseller. I am keen on US political books. I did the “right” thing and ordered the Yearbook of US Politics through the retailer. Three months went by nothing had hapopened. I enquired and they told me it wasn’t worth them importing it. I wanted that book so hey ho I went to Amazon on line to buy it.
    Yhe whole thing is a set up to use tariffs from one section of the business community to get an advantage.
    McClay is supposedly a National minister but he seems to be a Green by nature. As a National voter I’ll will be watching closely to see if my freedom is interfered with.

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  30. Redbaiter (7,645 comments) says:

    “Why does this stupid (and greedy) government give oxygen to this Customs and IRD “working party”?”

    Quite correct. Where does the impetus for this shit come from?

    National should nip it in the bud.

    They don’t because under all the false rhetoric, they’re just Labour lite.

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  31. BeaB (2,060 comments) says:

    It is very clear from ministers’ comments eg Maurice Williamson, they are keeping their SME constituents happy by investigating it but will drop the idea as far too costly and difficult. No-one else has found a solution.

    Perhaps in the future there will be an international agreement like the postage one. I doubt I’ll see it in my lifetime so cannot work up any head of steam like some of you.

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  32. rouppe (919 comments) says:

    Colville, there is a 10% import tariff on footwear

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  33. Albert_Ross (252 comments) says:

    What BeaB said.

    Are we really saying that Governments should not even think about possible new ideas? That it is always obvious, without needing to look at the evidence and consider different points of view, whether an idea is likely to work or not? That a minister who puts out some thoughts for discussion and then decides against them on the basis of people’s comments, thereby looks like a wally?

    This is a recipe for political closed-mindedness and scleroticism. Is this what we want?

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  34. dime (9,473 comments) says:

    roupp e- why on earth does that still exist?

    to protect the giant reebock factory in motueka?

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  35. Ed Snack (1,740 comments) says:

    Actually it could be imposed easily and quickly, but very unpopularly. All overseas transactions (however made) paid from NZ pay 15% GST, and for goods consumed overseas (such as travel costs) or exempt items you can apply for and (perhaps) get a refund. There, dead simple. Paypal and other payment services, how are you going to pay them, credit card to overseas destination, pinged ! False invoicing is also useless as it’s the payment itself that is targeted.

    Of course one could carry cash overseas, or pay from overseas sources, so ban cash exports, and undeclared overseas cash holdings would also need to be banned. Those only affect a very small minority as most NZ’ers don’t have ready access to off shore bank accounts with overseas sources of income.

    I guess I shouldn’t give the bastards ideas, not that I imagine this hasn’t been already thought of; sounds like a green party policy too.

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  36. beautox (430 comments) says:

    I wouldn’t mind so much if they just charged you GST on orders over $400. But oh no. You get loaded with all sorts of extra charges of the sort “we are charging you here for the time we spend charging you”. Case in point, I bought a camera from the USA, from one of our distributors who also sells cameras. My price was us$650 plus UPS us$139. So if I had to pay 15% GST on that it would be about us$118 (or about $150 at the then-exchange rate). I actually got charged $347, which is an effective tax rate of 33.8%

    Wankers.

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  37. rightoverlabour (70 comments) says:

    I listened to Maurice Williamson on the radio last night – never going to happen – too difficult and too many loop holes. If New Zealand retailers made their prices competitive with online shopping, we would buy locally. I buy a lot of toys overseas, almost always cheaper including the packaging and post. Just look at what LEGO costs in the States compared to what we are paying for it. New Zealand retailers are disgusting rip offs in this respect.

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  38. unaha-closp (1,117 comments) says:

    Can someone tell me why shoes are so cheap ex USA compared to here?

    Because of GST (and all the pointless regulation) our government imposes.

    If we scrapped GST prices of books, clothes and electronic goods would fall by way more than 15%.

    GST sucks the potential innovation out of the NZ retail sector. If a retailer offers off the shelf retail, but also offers importation of products to order the NZ retailer will always 15% more uncompetitive.

    The only option for retailers in NZ is to not compete on price. So our prices are always going to be uncompetitive.

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  39. peterwn (3,168 comments) says:

    Some lateral thinking needed here – perhaps the answer is to simply abolish GST. It may need a ‘wind down’ period over several years to ease disruptive effects. The trick would be to have a quasi consumption tax, by increasing tax rates, but providing rebates for savings and investment.

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  40. Ross12 (1,156 comments) says:

    Gerry Harvey ( Harvey and Norman) kicked in Australia about this late last year. In the end he gave up –or realised it was never going to happen in Australia. Why ? I’m not sure but my guess it is just too difficult.

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  41. themanwhowatches (18 comments) says:

    @rouppe 11:39 – if you exceed the $700 travelers’ concession you pay tax (and any duty) on the full purchase price.

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  42. wreck1080 (3,735 comments) says:

    I ordered something from Japan a while back, and expected to pay gst as it was over $400.

    But, they marked the price as less than $400 even though I paid more.

    So, no gst was levied , but does that mean I am now guilty of tax evasion? I knew of no process to pay the tax owing.

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  43. SHG (365 comments) says:

    It’s a joke, it’ll never happen, everyone knows it, let’s move on.

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  44. rouppe (919 comments) says:

    themanwhowatches

    I did wonder that as well, so I phoned Customs yesterday. They told me the concession was applied, and the GST was calculated on the remainder.

    There are slightly different rules applied to goods shipped in (i.e. bought from your couch and delivered) versus goods you bring in with you as accompanied personal goods. I think you’re right about GST in the former circumstance but not the latter.

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  45. Dean Papa (743 comments) says:

    and a lot of the LEGO sets you can’t even get here. The main reason a lot of people shop overseas is for choice as mush as price, and that’s never going to change.

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  46. Bad__Cat (137 comments) says:

    I buy online overseas because NZ retailers do not offer the goods I need. For example, in NZ, the widest (Brand X) shoes I can buy in store or on-line is 4E. In USA it is 6E.

    I would have used the convenience of buying local or online NZ if they bothered to have the same selection, even if they had to order them in. Now I know how easy & cheap it is to get it from overseas the NZ franchise & stores have lost a customer for all time.
    EDIT: Ditto for clothes

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  47. adam2314 (377 comments) says:

    Our tax system is wrong..

    No income tax.
    No company tax.

    Just a very small tax on OUT WARD monies.
    You spend you get taxed.

    NZ is going to be the first cashless society..
    So.

    Every one will have an electronic card..
    The drug dealer pays, he pays tax.
    The drug buyer pays, he pays tax.
    The wealthy man buys a Mercedes, he pays tax.
    The poor man buys a dunger, he pays tax.

    All on the same percentage..
    Each according to their means.

    I know ..I know.. Sounds Marxist.. But it would work and be very fair.

    No one could escape.. Even the onliners buying from overseas..
    They have to send money.. They pay..

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  48. Parlyguy (22 comments) says:

    Like Bad_Cat, I buy items from the UK and US that simply aren’t available here. Then these wankers want me to pay a tax to even things up and give NZ retailers a “fair go” when they don’t even offer the product I want!

    I also remember scanning the shelves of the Dimocks store in Wellington a few years back and being stunned that a book I had bought on Amazon for NZD1.00 (+12.00 shipping) had a price sticker of over NZD70.00! That was when I had an epiphany that I would probably never buy another non-mass paperback book in NZ.

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  49. mpledger (429 comments) says:

    I’ve paid several donations via paypal (American Public Radio, Wikimedia) so how is this tax going to differentiate between buying stuff that gets GSTed and donations that don’t accrue GST?

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