government plan to collect GST from overseas small purchases is silly

The TVNZ website carries this report about the NZ government planning to get overseas retailers to charge GST on goods bound for NZ and then remit it to the NZ government.

Our response is, "mate, you gotta be dreaming."

Ever since Roger Douglas's Goods and Services Tax (later emulated by Canada and Australia) was introduced in 1986, the government has exempted small amounts - originally this was $500 worth, but is now down to $400 worth, and inflation adjusted that is quite a reduction.  But many retailers complain that small purchases overseas represent direct competition with most of what they sell and ever since Bill English hiked GST to 15% in 2010, their association has complained to the government about what they see as unfair competition. This ongoing complaint is clearly what is behind the government's announcement.  But there are huge problems with the government's ideas.

Of course, the local retailers ignore the fact that overseas retailers invariably add shipping costs either directly or indirectly. And the prices they pay to local wholesalers on imported items include big middleman mark ups.

But the most relevant aspect is that the time that would be spent by Customs in collecting small amounts on every one of the huge volume of imported items is likely to cost as much or more as what they will collect.  The NZ Customs department is already bureaucratic and inefficient as it is and is a major cost to importers (not that overseas counterparts are much better).

Recently there was an attempt in the US to overcome the state/county sales tax exemption for buyers in other states with every retail business operating above a certain turnover calculating sales tax in the various buyers' states and then remitting it to each of the 45 states that have a state sales tax.  Somehow the NZ government thinks that they are now going to be willing to calculate and collect it for every country in the world and the remit it to each of those countries...  We think not.

In the case of books, as we have pointed out several times, nearly every country in the EU has a concessional rate of VAT on books, and in the UK and Ireland there is no VAT on books.  NZ charges a whopping 15%, the second highest in the world after Denmark, which since 2010 has been slowly killing the industry.