Lumley on GST from foreign websites

Thomas Lumley blogs at Stats Chat:

From a Retail New Zealand Media Fact Kit

“The amount New Zealanders spend on goods from foreign websites is approaching $1.5 billion and this number is growing all the time.”

is 15%, so the total payable on an amount approaching $1.5 billion would be approaching $225 million.

Since $1.5 billion would be approaching $900 per household (1.68 million households according to StatsNZ), I assume it includes quite a few business purchases as well. For these, any increase in GST on the purchase would later be deducted from the business’s GST liability, leaving a net zero.

For non-business purchases, some of that GST is already payable under current law (if the total value of a single package is over $400). Some would still not be payable if the threshold was lowered to $25.  Also, some might not be payable and definitely would not be easily collectable at the border because the purchase is an electronic download — e-books or music, for example.

Putting all these together, the potential increase in revenue has to be less than 15% of $1.5 billion, though it’s hard to say how much less.

So the absolute most is $225 million but it could be much less than that.

The Media Fact Kit says

“The Government misses out on at least $200 million in tax (maybe as much as $500 million) every year”

Based on their expenditure numbers, that doesn’t look plausible.

So don’t believe their claims.

One of the differences between a Treasury Regulatory Impact Statement and a “Fact Kit” from a lobby group is that the numbers in the RIS have to add up and the document needs to give sources. If, as Radio New Zealand reports, there will be a proposal for Cabinet this month, we might be able to get some real numbers about the likely revenue and costs, and perhaps even how the economic impact would compare to other ways of raising taxes.

Indeed.

If the Government drops the threshold to a level that means books and minor purchases get detained by Customs, then the compliance costs will chew up a lot of that revenue – and piss off a lot of New Zealanders.

 

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