New Zealand GST could soon be charged on ebooks

[GeoffR]

Online shoppers could soon be hit with GST (New Zealand Herald)

The Prime Minister has warned New Zealanders they could soon be paying GST on online purchases as small as a song download from iTunes.

[...]

GST is not currently charged on imported digital products such as music and film downloaded from services including iTunes. Physical goods bought online and worth less than $400 also usually escape GST.

Edit: New Zealand GST is 15%.

[Lynx-lynx]

Geoff the reason the Aus gov't doesn't introduce GST on goods under $1000 puchased overseas is because of the cost of capturing and enforcing the revenue.

Can't say too much else because otherwise the thread will be whisked down to P&R.

[theducks]

Originally Posted by Lynx-lynx

Geoff the reason the Aus gov't doesn't introduce GST on goods under $1000 puchased overseas is because of the cost of capturing and enforcing the revenue.

Can't say too much else because otherwise the thread will be whisked down to P&R.

Gee! The number has gone way up since the 1990's

We had a tip from someone very familiar with AU Customs to keep book incoming shipments under $40US

We also got a reminder: "Never falsify a Customs Declaration. You will end up having every shipment examined... "

[jehane]

Originally Posted by theducks

Gee! The number has gone way up since the 1990's

GST was only introduced into Australia in 2000. Prior to that there were various sales and import taxes.

We had a tip from someone very familiar with AU Customs to keep book incoming shipments under $40US

Not sure whether that is due to a tax collection threshold or other reasons.

[sherman]

We (NZ) have had this argument around overseas GST for a while now.

What seems to have prompted this latest round is Netflix, whose introduction here is imminent, have said they are not going to collect GST. The local competition of course, are not happy, as they have no choice but collect GST.

[AnotherCat]

Originally Posted by Lynx-lynx

Geoff the reason the Aus gov't doesn't introduce GST on goods under $1000 puchased overseas is because of the cost of capturing and enforcing the revenue...

That is the same reason as here in NZ, collection of taxes and duties (if any, as few things have duty) under NZD60 (so goods to value NZD400 if GST only is levied) is stated to be uneconomic.

So it seems to me that the Government is planning on collecting GST on physical goods coming into the country even if it is at a loss (when in fact they are wanting to increase revenue). Else, as happens if tax and duty is payable they are going to charge a transaction fee (currently approx. NZD48) over and above those to cover their costs; that will kill smaller imports. It will also keep a small army of clerical workers busy transacting it all for every little parcel that comes into the country.

For digital products it seems to me that they must be planning to send a frigate to threaten every country who does not create legislation forcing all their own internet digital products suppliers to comply with NZ's tax legislation. Wherein lies a problem in that NZ has only got 2 frigates and so only 2 countries can be threatened and those will have to be countries with no navy at all.

Else, the Government is going to block all the millions internet sites of digital products sellers around the world from viewing in NZ unless they comply with NZ tax legislation; that will keep someone busy.

The whining of the retailers is pathetic, but behind the scenes I do know there are some good retailers who sell on the web and are very quietly doing well selling from NZ to foreign buyers as well as locally because they know how to operate competitively. The whiners are happy to claim they are disadvantaged by the 15% GST but they never mention the cost disadvantages foreign sellers into NZ face and so the whiners are just lobbying a selfish cause.

For example, a pair of shoes that retails in NZ for around USD140 may be found on US web sites for around USD50-60 but then the freight on top of that may be USD40 for tracked rapid courier delivery which leads to the all up price being around USD100. So even with US suppliers facing a freight cost approaching the cost of the shoes themselves NZ suppliers still cannot compete. Furthermore the product selection of NZ suppliers is abysmal in comparison.

Furthermore, much of the whining is coming from apparel and shoe retailers and again they don't mention that they are among the very few who have the luxury of being protected in NZ by duties on imported competitive goods (that duty being currently 10% except on babies apparel which is zero rated).

I guess it is clear that I have very little sympathy with the complaining retailers, but I should say that there are some very efficient ones too (and as I said I know some of those are doing ok exporting via web sales too) and those I am very supportive of; else our purchases are imported (another pair of shoes due today from USA ).

[Lynx-lynx]

Originally Posted by AnotherCat

.... For digital products it seems to me that they must be planning to send a frigate to threaten every country who does not create legislation forcing all their own internet digital products suppliers to comply with NZ's tax legislation. Wherein lies a problem in that NZ has only got 2 frigates and so only 2 countries can be threatened and those will have to be countries with no navy at all.

oooooooooohh ..... the mouse that roared!!

My guess is that it will be an ANZAC force and we'll join with you using which ever of our 12 frigates we've got left over from other duties. So we'd need to start sorting out how to divide the world up now and who to target .... bearing in mind that retail is a 'moving target'.

[murg]

Originally Posted by Lynx-lynx

oooooooooohh ..... the mouse that roared!!

My guess is that it will be an ANZAC force and we'll join with you using which ever of our 12 frigates we've got left over from other duties. So we'd need to start sorting out how to divide the world up now and who to target .... bearing in mind that retail is a 'moving target'.

Don't forget our submarines...

[GeoffR]

South Africa have already done this. Foreign companies selling into South Africa charge South African VAT. So there shouldn't be any reason New Zealand couldn't do it too.

[Lynx-lynx]

Geoff does Sth Africa get the foreign companies in foreign countries to collect the GST irregardless of how small the purchase is?

Irrespective of monetary size of purchase how does the SA Gov't monitor the purchase and then ensure that the company hands the money over to it, particularly withregard to say an ebook or music or audio book?

[Lynx-lynx]

Originally Posted by murg

Don't forget our submarines...

Oh yes, the subs can trawl for bottom of the harbour purchases!!

[GeoffR]

Originally Posted by Lynx-lynx

Geoff does Sth Africa get the foreign companies in foreign countries to collect the GST irregardless of how small the purchase is?

I think so, but someone from South Africa might know better.

Irrespective of monetary size of purchase how does the SA Gov't monitor the purchase and then ensure that the company hands the money over to it, particularly withregard to say an ebook or music or audio book?

It is not a matter of monitoring every single company, from what I understand the South African govt. just passed a local law requiring foreign companies to register for VAT. There is no way to enforce that law outside South Africa of course, but most of the big foreign companies chose to follow the local law anyway.

The vast majority of online purchases are through a small number of big foreign companies, so if the idea is to increase tax revenue then it is worth doing as long as those few big companies get on board. The South African case shows that they will.

[AnotherCat]

Originally Posted by GeoffR

South Africa have already done this. Foreign companies selling into South Africa charge South African VAT. So there shouldn't be any reason New Zealand couldn't do it too.

This is something which is being bandied about ad infinitum as if the final solution has been found. Often with the meaning they are doing it we should too. While those words are now received opinion it is actually very hard to find out how and if it is actually working.

My understanding is that because it cannot be enforced in law outside of South Africa's borders (after all South African law does not apply to the rest of the world - I don't know how big their navy is but at one time it was said that they had nuclear weapons ) remitting of VAT by foreign suppliers of digital products is essentially VOLUNTARY (what a giggle).

Look for the enabling regulation LAPD-LSec-Reg-2014-03 - Regulation R221 GG 37489 28 March 2014 and there is no method of collection apart from saying that foreign suppliers have to pay VAT on the named digital products.

Last I heard there were less than 100 foreign suppliers who had volunteered (it has been in effect since April Fools Day last year). One wonders if there was some other unrelated part of their operations in South Africa which enabled the SA Government to threaten to kneecap them if they did not "volunteer". Countries that use such coercion are essentially of a despotic nature.

[GeoffR]

Originally Posted by AnotherCat

Last I heard there were less than 100 foreign suppliers who had volunteered (it has been in effect since April Fools Day last year). One wonders if there was some other unrelated part of their operations in South Africa which enabled the SA Government to threaten to kneecap them if they did not "volunteer". Countries that use such coercion are essentially of a despotic nature.

If those 100 companies include the few big companies that are responsible for the majority of purchases, then that would be enough to make a law change worthwhile. This story quotes "PWC tax partner Eugen Trombitas":

http://www.stuff.co.nz/technology/di...arge-kiwis-gst

Although it would be hard to apply sanctions on overseas companies that did not register, the South African experience suggested multinationals would play ball, he said.

"The registration of foreign sellers is easy and works well. About 80 to 100 foreign sellers have registered. All the 'big ones' are in."

[AnotherCat]

So I can assume that as you think it is ok for companies to pay tax in countries in which they are not domiciled ("voluntarily" for reasons we can only assume, but will be related to coercion) you make a point of voluntarily paying tax that you do not have too ?

How would you feel if you were a small NZ software supplier that received some orders from the general public in S Africa and also had a small contract to supply some software to the S African Government and you so felt obliged to pay VAT on the general public's purchases in order to protect your Government contract?

How about you as owning a NZ based company had 20 employees and sold a software product into 30 countries, say 2 sales per country, and they all followed S Africa's example and "demanded" that you paid VAT/GST so you had to register for VAT/GST and provide returns in all of them? Then you get an order from another similarly despotic country for $100 of digital products; do you then register in that country too? I assume you would be quite happy to do so (while the distraction of maintaining VAT/GST returns for 31 countries you don't even have a presence in, as well as the burdensome task of complying with the reporting requirements of ones own country, causes your business to fail under you).

Or does your thinking only apply to "big" companies as by received wisdom it is claimed they are ripping "us 99%" off and so deserve to be screwed?

As I said, the approach is that of a despotic government and why am I not surprised about S Africa being the country where it has been implemented?

{For the sake of clarity I do not sell digital products }