GST online

The Herald reports:

The Prime Minister has warned New Zealanders they could soon be paying GST on online purchases as small as a song download from iTunes.

Mr Key said it was inevitable that the cost of online shopping would go up as GST was charged to more goods and services.

GST is not currently charged on imported digital products such as music and film downloaded from services including iTunes.

Because they are not NZ companies. Good luck getting global companies voluntarily agreeing to put their effective prices up so they collect tax for the NZ Government. It is unfair to NZ companies, but there is no easy fix.

A suicidal government could try and ban NZers buying goods from companies not registered for tax in NZ. Ban access to iTunes, Netflix and the like. I think david Parker proposed banning Facebook if they didn’t pay more tax in NZ. National is not so stupid.

The only real solution is for the major economies to agree that a company resident in one country will register for GST type taxes in each country it sells to. But if even one major economy doesn’t become part of such an agreement, then it won’t work. The OECD does have a work programme for this.

Physical goods bought online and worth less than $400 also usually escape GST.

Because the cost of stopping every envelope and parcel at the border, and holding it until GST is paid by the buyer, would cost tens of millions. The de minimis amount should be set at the point which the revenue would significantly outweigh the collection costs. This may be less than $400, or more than $400.