Retailers fresh GST tax grab must be rejected

A conference in Wellington yesterday heard how countries could work together to grab the GST and customs payments on goods sold over the internet.

A paper published by Victoria University, Wellington, claims that New Zealanders are spending more than NZ$3 billion on overseas websites, and not only is our government missing out on hundreds of millions of dollars of GST, but this also places our retailers at an unfair disadvantage.

Governments have grappled with this problem before. Australia recently decided that it would, for now, keep its current AU$1,000 tax free limit, despite similar claims that it, too, was losing GST revenue.

In this latest report, we are told that international bodies like APEC, whose members include Australia and New Zealand, could work together and ensure the taxes and customs duties are collected. Online retailers would be given faster customs clearance for their items as a reward for collecting those duties for government.

Certainly this latest proposal, commissioned by book sellers in New Zealand, seems to offer the most promising set of solutions to this GST "problem" that we have seen to date.

However, in the ensuing debate that followed, we can see that problems still remain, and if it is not a case of back to the drawing board, it is certainly one of once more abandoning such tax grabs on grounds of practicality, as well as the economic and political consequences.

As David Farrar at Kiwiblog said today, "retailers need to stop trying to tax us online".

Farrar noted that the costs of trying to intercept every parcel and making its recipient pay GST would far exceed the revenue raised. At present, New Zealand has a limit of several hundred dollars before imports face GST, making it economic to collect such taxes.

Furthermore, how would GST for intangible things like iTunes be paid for? Could the government even stop people making such downloads without taxation?

Would big retailers, such as Amazon, be willing to act as tax collectors for the New Zealand government? Could we even expect small overseas retailers to be a Wellington tax agent, too? Might they find serving the odd New Zealander just too bothersome?

And I am sure that buyer and seller might find some way of overcoming such taxation hurdles as well.

Furthermore, while retailers might bleat at losing such trade to overseas websites, aren't they party to blame themselves for the situation?

Websites offer a much wider range of goods sold, often selling items not available in New Zealand. Items sold on such sites are often far cheaper, too. It is not just the "missing" sales taxes that bring such online sales bargains, but typically economies of scale allowing for far lower prices in the US, the UK, or wherever.

If we have "rip-off retailers", then consumers buying from overseas can help keep them in check.

In New Zealand, we have seen how parallel importing has helped reduce the price of mobile phones. And it is perhaps on this issue of price and competition that government inquiries into technology prices, as seen in Australia, just might well be justified if they truly uncover why overseas goods are cheaper. That the producers are to blame!

But, of course, online retailing is a game all can play. What is there to stop our own retailers from taking on Amazon and similar giants? In New Zealand, we are doing this already. Torpedo7 is a Kiwi site that sells to Australia, too. Why can't it expand further internationally?

This month, we have also seen ecommerce entrepreneur Shane Bradley launch yet another online retailing venture. What is there to stop him from taking it overseas, too?

Rather than seek to hinder such revolution in retail, existing retailers need to come to grips with the situation and let the consumers, and the market, continue to make their choice.

Not only are the retailers' proposals still unworkable and impractical, they also seem keen on stifling technological change and the desires of consumers everywhere.