Amazon tax presenting handling challenges
Opinion: National kicked for touch and Labour knocked on, writes Tom Pullar-Strecker.
Labour Revenue Minister Stuart Nash was forced into an embarrassing backdown this week on the plans the Government wants – but as it turns out doesn’t yet have – to ensure GST is paid on overseas internet shopping purchases.
He is hardly alone in being tripped up by the issue.
Governments all around the world have a problem creating a level playing field for their domestic retailers, without creating chaos for consumers by introducing an unpopular tax that foreign firms may not even pay.
Most – with exceptions such as Australia and Switzerland – have chosen to bury their heads in the sand until someone else proves they have a solution.
National’s revenue spokeswoman, Judith Collins, revealed this week that National had been committed to introducing GST on low-value imports before it lost office.
But it has to be said that was not something it communicated publicly before the election.
From the sidelines, it appears National kicked aimlessly for touch on an Amazon tax, before Nash attempted his quick lineout and then knocked the ball on when he collided into the stationary Finance Minister Grant Robertson.
Collins clarifies that the National Government had not in fact decided whether or how to introduce an Amazon tax, but says it was attempting to do so.
She hinted darkly on Wednesday that officials had found serious complications concerning duties, biosecurity levies and the way Customs is funded.
That had some tax experts scratching their heads.
From Collins’ explanation, I believe the difficulties may be more about some ‘‘nice to have’’ changes National was contemplating as part of a more comprehensive reform of Customs’ duties, but which needn’t in fact be tied to an Amazon tax.
In July, Australia will become the first country in the world to require foreign firms to collect GST on low-value goods they ship to Australians.
Its biggest challenge may be in persuading online marketplaces such as eBay to play ball.
Even before this week’s stumble, it was probably getting too late for New Zealand to jump on Australia’s coat-tails and introduce the same tax in the same way in July.
While that could have had advantages in terms of encouraging compliance by foreign firms, PwC tax expert Eugen Trombitas rightly points out that there is also a case for waiting a bit to see if Australia’s Amazon tax is a success.
Robertson’s directive that the Amazon tax should be looked at by the Tax Working Group will greatly worry Kiwi retailers, though, as it suggests the Government may be thinking it could wait three years before deciding how to address the internet shopping issue.
Such a long period of inaction may not be realistic, unless Australia’s Amazon tax turns out to be a debacle.
Nor, would it seem necessary unless it is thought the Tax Working Group might contemplate axing GST altogether.
From July, New Zealand businesses selling products direct to consumers in Australia will have to add its 10 per cent sales tax and send that money to the Australian Tax Office.
But businesses sitting on the other side of the ditch will have no such reciprocal responsibility.
Political embarrassments are one thing; real-world problems like that are quite another.