Dear Zoo, or why charging GST at the border won’t change anything

Dear Zoo, by Rod Campbell

Dear Zoo, by Rod Campbell

My all time favourite book to give to new babies is Dear Zoo, by Rod Campbell, preferably in the board book version, which is much easier for tiny hands to manipulate.

I bought a copy from my local bricks and mortar independent bookshop last year for my cousin’s daughter’s new baby, for $16.95. However, at the time I could have bought it from Book Depository and had it delivered right to my door for about $10. Right now, Book Depository is selling the board book version for $12.25.

If I bought the book on-line today, I would save about $4.70, or 28%. Even if 15% GST is added at the border, the cost to me would be $14.09, and I would still save $2.86, or 17% off the retail price.

It’s only a few dollars, and often enough, I’m willing to pay those few dollars. It’s the price of convenience, or alternatively, the cost of disorganisation. Later on this year this, when Hilary Mantel’s third book in her Thomas Cromwell series comes out, I might buy it on-line, because I should end up saving about $15 on the local retail price (based on what Book Depository charges for Wolf Hall, and a local retail price of about $35). Even if GST was charged at the border, I’d still save $10 or so, or about 28%. That’s worth being organised for.

The real problem for bricks and mortar retailers is not that GST is not charged on goods coming into the country if those goods are worth less than $400. The problem is that on-line retailing is much, much cheaper to operate than running a shop. On-line retailing is a massive disruption to our traditional shopping model, and adding GST to retail goods imported by individuals won’t change that.

We really ought to be charging GST at the border. GST is a tax on consumption in New Zealand, and at present, some consumption is escaping the tax net. If we think about it for the sake of consistency alone, we ought to be attempting to charge GST at the border. However, up until now it hasn’t been clear that it has been worth doing so. There’s only $15 of GST on each $100 of goods imported into country, and it probably costs more to collect the GST than the government would earn in tax revenue.

Except that the total value of goods bought on-line has been going up and up, and now it seems that the government is missing out on something like $300million of GST. That’s starting to look like real money.

I think the government should be attempting to collect at least some of that GST, on the grounds of consistency alone. And to its credit, the government is very clear about its reasons for attempting to collect it. It’s not about small retailers at all. It’s all about shoring up the tax base.

This entry was posted in Economics, Taxation and tagged , . Bookmark the permalink.

2 Responses to Dear Zoo, or why charging GST at the border won’t change anything

  1. Key all but admitted on news last night that some etailers, especially smaller ones, won’t be able to, or won’t find it profitable, to wear the disproportionate compliance cost of this, so will simply geo-block sales to NZ. Thus NZ consumers will higher costs, less choice: that sucks.

    Indeed, the only firms who can afford to wear this will be the big multinationals: the tax state, and the huge global tax surveillance states that now exist, at the expense of free, private societies, ensure huge multi-national corporates end up with monopolies, and see to the death of the small firm and diversity.

    We pay a huge price for your tax state, Deborah, and the advantages are illusory in that our welfare states make us all worse off in the long run.

  2. M-H says:

    This is extremely complex. People who sell digital goods into any EU country are now supposed to be paying VAT to the EU governments; different rates for different goods and different rates in each state within the Union. Some countries haven’t even got their system for collection of payments in place yet, while others have a completely chaotic and contradictory regime operating, through which the same query on different days will receive a different answer. As many of these sellers are small or even micro business selling music, knitting patterns, apps, etc most of those who are outside the EU have simply blocked sales to the EU because the cost of compliance is too high. This is a real risk when you’re dealing with very small amounts of money, and NZ buyers wouldn’t make up enough of a market for sellers to bother engaging with the bureaucracy.

    On the other hand, I can see why local retailers would be cross with the competition. It’s a conundrum!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s