The Warehouse Group (TWG) has made an appeal to the Prime Minister to instate the overseas online GST on purchases overseas.
Its views were included in a report produced by independent public policy think tank, The New Zealand Initiative.
The Prime Minister invited The New Zealand Initiative members to suggest government regulations they think should be changed or scrapped.
“We are all for competition in the marketplace – we accept it, we encourage it and we thrive on it,” TWG states.
However, it says the current de minimis rule creates an exemption for overseas online purchases under $400, which results in an uneven playing field for retailers.
“Currently New Zealanders are spending approximately $1.5 billion with international online retailers each year,” TWG says.
“That is the equivalent to a business twice the size of Farmers Trading Company and equates to a loss of approximately $225 million in GST each year.”
It says New Zealand’s online spending at international retail sites is growing at a faster rate than domestic online sales.
“Due to our country’s size and location, we are even more susceptible to a steeper incline in this trend due to the broader range that international online shopping provides,” it says.
In its submission piece on online GST, InternetNZ argues New Zealand’s size and location is the reason why the government should tread carefully with imposing tax.
“New Zealand is a small market, and benefits from access to overseas products,” it says.
“There is a risk that real or perceived compliance costs will stop overseas suppliers from selling into NZ. Any change in this area must be carefully crafted to avoid barriers to trade.”
It says it acknowledges that local retailers may see what is happening now with overseas online GST as unfair.
“However, it is far from clear than extending GST to low-value overseas purchases will affect the choices of consumers. People buy from overseas for a range of reasons, including variety of products and price differences much greater than the GST margin of 15 percent.”
It says it supports the goal of fair tax treatment, but has practical concerns about the way this is going to be implemented.
TWG says it’s not just retail sales the lack of GST on low-value goods is impacting on.
It says the commercial development of shopping malls in New Zealand is likely to be hindered, especially since online sales will affect small specialty retailers, which are the cornerstone of mall developments.
This would have a negative flow-on effect to the construction industry, it says.
TWG says employment is also being effected.
“The 15 percent price advantage enjoyed by international online retailers is taking growth out of the market and making domestic retailers uncompetitive,” it says.
It says this price will likely lead to a decline in New Zealand based retail businesses, as well as jobs in manufacturing and construction.
The key principles TWG thinks should guide change to the de minimis rules are:
- Provide a level playing field to ensure true competition.
- Avoid New Zealand taxpayers subsidising offshore retailers.
- Provide government with the tax revenue it is entitled to.
- Ensure New Zealanders who choose to shop with international online retailers have a positive impact on New Zealand’s social and economic development.
InternetNZ’s key points it thinks should guide change to the de minimis rules:
- GST collection must not act as a barrier to trade, which would harm New Zealand consumers and businesses by limiting access to imported goods and services.
- Compliance costs must be minimised. Any compliance threshold should be no lower than the $60,000 domestic GST-registration threshold.
- InternetNZ is concerned suppliers will cut off sales to New Zealand because of expensive compliance costs. Also, if it looks difficult to sell into New Zealand, suppliers might also not be keen regardless of price.