GST crisis puts spotlight on govt greed

The issue of GST-free goods bought from overseas websites has resurfaced in New Zealand.
Written by Darren Greenwood, Contributor

The issue of GST-free goods bought from overseas websites has resurfaced in New Zealand.

Trade Me has announced a deal with US-based ChannelAdvisor to promote overseas-sourced foreign brands on its mega-website.

The deal shows Trade Me, which is viewed by 660,000 Kiwis every day, moving away from being a mere auction house to being a broader-based e-commerce site.

Around 40 per cent of goods sold on it are new, with many overseas firms using Trade Me to sell their goods, instead of creating a specific website of their own to serve New Zealand.

Retailers say that the GST-free threshold of $400 costs the government $100 million in lost taxes, and claim that these duty-free allowances represent an unfair subsidy to foreign retailers.

Australia faces the same issue, with shoppers buying stuff from overseas, and, as I noted recently, the controversy showed that e-commerce really has arrived.

But isn't it a problem caused by government greed? The state wanting to tax everything that moves?

Growing up in Britain, I recall how duty rates on alcohol, cigarettes and similar products were much greater than the taxes on them in continental Europe. UK travellers would eagerly stock up on "duty free" when they went abroad.

Then the duty-free allowances were abolished within European Union states, but people were free to bring in whatever they liked without restriction, as long as they could show that it was for their own use.

Thus, the Calais "booze cruise" arrived, and Britons would visit France on cross-channel ferries and fill up their vans and car boots with cheap liquor. French hypermarkets cashed in, while UK supermarkets also opened in Calais, to the detriment of those in Britain.

The UK Treasury finally realised that its duties were too high, and were costing it money. Over time, the gap between British and French duty rates narrowed, and the "booze cruises" lessened in popularity. UK supermarkets also produced better deals for consumers.

Likewise, the GST problem is largely a government creation. Were governments not so greedy in wanting to tax everything and implement high rates of GST (15 per cent in New Zealand), the price differences between countries would lessen.

Retailers can also take some blame. They, too, have exploited the New Zealand consumer for far too long. Adidas, with its exorbitant price of All Blacks jerseys, is a prime example of a rip-off retailer.

I have just been watching a a British TV documentary that says the internet was a "libertarian" invention. It is also anti-business.

Now, that might seem contradictory, but it all depends on your point of view.

The internet is anti-big business. It is levelling the playing field, and is helping to deliver free-market capitalism, competition and consumer power. Consumers now have enough information to curb abuse from monopolists. A fairer free market is thus appearing in retail.

In the pre-internet era, we would not have known what certain goods cost overseas. It would have been harder to work out the currency exchange rates. Specialist retailers like eBay and Trade Me did not exist, either. Harrods of London and David Jones in Australia might have posted some goods to their customers, but nothing like what they might today.

Thus, we have an online world of knowledgeable consumers, and "the masses" having market power — something that I also noticed before, when noting how energy prices in New Zealand fell earlier this year, thanks to online price-comparison sites.

As the internet has tackled the greed of big business, now e-commerce must also challenge the greed of big government.

Many governments accept that high (income or profit) taxes damage business and the economy, and can consequently actually generate less revenue.

Thus, governments must reduce taxes to lower the price differential and encourage shoppers to buy in their own countries.

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