The government has announced plans to introduce a 15 per cent GST tax on goods purchased on overseas websites.
Retailers yesterday rejoiced at the Government's move to enforce an "Amazon tax" but one analyst says it's not the silver bullet the troubled sector needs.
From October next year, foreign companies will need to collect GST on all goods valued under $400 — the same way companies do with digital services such as Netflix and Spotify.
Overseas retailers will be required to collect GST if their total sales to New Zealand consumers exceed $60,000 per annum. This is the same threshold that applies to domestic businesses and to foreign suppliers via e-commerce platforms like Alibaba.
Craigs Investment Partners head research analyst Mark Lister said collecting GST on low-value goods from foreign companies would not remove the hurdles publicly-listed retailers face.
"While it's a positive, there's still a lot of things out there that is making life quite difficult for retail," Lister said. "Online shopping is still an attractive way for consumers to buy products — price isn't the only reason, convenience is also a factor, but a lot of products still may end up a little bit cheaper."
The move would not close the price gap between local retailers and overseas competitors, and collecting GST on low-value goods would not change consumer spending habits which favoured online shopping, he said.
"I don't think it's going to make a massive difference to consumer behaviour. It is a positive but it's an incremental positive rather than a game-changer."
Lister said the outlook for the retail sector was still mixed, with consumer spending set to slow, and the New Zealand dollar coming off the boil.
"I think if you were an investor, you'd still be much more comfortable backing some of these online operators rather than traditional bricks and mortar retail."
Kiwi e-commerce retailer Mighty Ape welcomed the move to collect GST from foreign companies but general manager Dylan Bland was worried local retailers would see it as a silver bullet.
"The new tax may push prices up a little for some of our competitors overseas, which will inevitably help retailers in New Zealand, including Mighty Ape," Bland said. "I worry for a local retailer who sees this as a silver bullet — a 15 per cent price advantage is not the primary reason Kiwis have changed their shopping habits.
"It may also have the longer-term impact of forcing some of these offshore retailers such as Amazon into the New Zealand market so they can offset their GST which moves the threat closer to home."
NZX-listed clothing retailer Hallenstein Glasson Holdings' share price increased by 70 cents, or 1.5 per cent, yesterday following the announcement.
Auction site Trade Me said the collection of GST on low-value goods would level the "online retail playing field for Kiwi businesses" but company spokesman Paul Ford said he is wary that the Government's regime would undermine competition in the online shopping and advertising markets.
"The changes are helpful for our New Zealand sellers," Ford said. "We're supportive of the move to collect GST on low-value imports, but as always we're keen to see it implemented in a straightforward, effective, fair and practical way."
Mark Lister, head of private wealth management at Craigs Investment Partners. Photo / John Borren
Sam Shosanya, chief executive of Paper Plus Group, said he believed collecting the tax on low-value goods would deliver a boost to the retail sector.
"We welcome competition as it is good for customers to have both range and choice but the GST situation has simply not been fair," he said.
"A boost in local retail means more jobs, more taxes paid to the government and more prosperity for shops from Queen Street in Auckland, all the way to small town New Zealand in the regions."
Retail consultant Chris Wilkinson said GST collection on goods under $400 had been "long-awaited" for retailers but it would push prices up for consumers.
"What it will do will help people reconsider their purchases and it will definitely even up the playing field and create a much more equal position for retailers," Wilkinson said.
"We [were] an outlier, the only country that hadn't acted on this, and that has been the most disappointing thing for our businesses, property owners and anyone involved in the sector."
