Government to politely ask overseas online stores for GST

Posted: November 16, 2015 in government
Tags: ,

The government is now proposing to apply GST to goods and services sold online by overseas vendors. This would mean that your netflix subscriptions, Steam purchases, Amazon purchases, iTunes purchases, Google Play purchases, and possibly your Kickstarter donations, (depending on how much revenue Kickstarter takes in fro New Zealand- it may well be above $60k annually. Kickstarter already allows projects in New Zealand dollars so may already have its GST infrastructure set up) would all need to track how much money comes from New Zealand purchases, and return 15% of revenues to the New Zealand government if their total annual revenues from New Zealand exceed $60,000.00.

Or would they?

If you read the press release carefully, you’ll notice that as New Zealand law can’t apply overseas, they’re essentially just asking very nicely for these companies to track tax information, and expect them to voluntarily comply out of the goodness of their own heart, or at “risk to [their] reputation”. That’s incredibly naive, and much more likely to hit medium-sized digital businesses than large multinationals, who largely have no problem tax dodging. *cough*google*cough*facebook*cough*vodafone*cough* – sorry about that, had something in my throat.

If the government is really concerned with fairness around transaction taxes, it should axe GST and shift the tax burden to unproductive areas of the economy, (such as large-scale capital gains, speculative investment, pollution, and other social ills) as it’s an incredibly unfair tax in general, and it’s complicated to administer. Applying GST to even more goods and services is just further discouraging involvement in digital life for New Zealanders, who already pay unfairly high prices for digital goods, which have no sunk cost to be sold in New Zealand beyond their actual development.

The systems to do this would not be complicated- the government’s proposal largely mirrors the EU’s existing tax requirements, so the UI should already be designed and ready to go for any firms doing business in both Europe and New Zealand, which is likely to be most of them. Basically it says that if any two pieces of information collected for the transaction (say, a credit card through a New Zealand bank, New Zealand address, New Zealand phone number, or a New Zealand IP) agree that the transaction originates from New Zealand, GST should apply.

Basically the only changes for users are possible price inflation of online services that pass on GST costs to consumers, (which is a double-hit against overseas digital services, as we already pay extra value so it can be converted into a sizable profit in US dollars) and that self-employed businesspeople or small businesses earning over $60k may need to provide GST information when purchasing digital goods and services, or shipping goods in online from overseas, and will be liable to a fine of up to $25,000.00 if they try to provide false info. Because there are so many avenues to identify whether someone is from New Zealand, I highly doubt the speculation on twitter that anyone is going to be hit with a similar fine for using a VPN to somehow “dodge” GST, especially as they will most likely be paying from a New Zealand bank and providing a New Zealand address when buying goods and services online.

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