This question highlights why we must act, to innovate and think outside the box because maintaining the status-quo will see us become ever less competitive in the digital economy, which increasingly IS the economy. The advent of the internet age presents us with almost limitless opportunity but also great peril should we fail to grasp it.
In this case I suggest that GST is a distraction. Setting aside the fact that there's evidence that it's uneconomic to collect GST on imports less than $1000, the fact is that local retailers will find it increasingly difficult to compete with online retailers due to economies of scale and product range and availability regardless of differences in tax regimes. Competing on price alone is a race to the bottom where large internet retailers have the odds stacked in their favour. We need to think globally and lift our competitiveness in the digital economy - no longer limited by geographic isolation we have the same opportunities to compete globally as online competitors but we need to innovate. Regardless of industry, in today's economy every business is a software business and the sooner we realise that the faster we can begin to transform our economy. The Internet Party will drive technology enabled transformation, supporting businesses of all sizes with the skills and tools to apply technology in ways which will improve overall productivity and competitiveness and ensure our prosperity in the digital age.
Paul Doherty
Green Party
The following are relevant points from our business policy.
Protecting Businesses from Unfair Competition:
Require mandatory country of origin labelling for all imported products; promote the value and importance of buying New Zealand-made products; support mandatory product insurance for all imported manufactured goods; investigate other pre-market methods that will help address unfair competition; support and educate businesses to adopt sustainability as a core value; seek to promote a fair competitive environment for NZ businesses that removes outright competition with products and services from countries with poor human and worker rights records and with poor environmental practices.
Encourage public and private investment in sustainable businesses; promote public recognition and pride in New Zealand companies; support New Zealand's manufacturing base; make it easier for businesses to invest in appropriate technology and research; make compliance easier, especially for small and medium enterprises; support the initiatives of manufacturers to work collaboratively to improve and transform the manufacturing sector in New Zealand; ensure the interests of manufacturing are represented at Cabinet with a minister whose portfolio includes responsibility for this sector and encourage business-to-business local procurement practices.
Supporting Small Businesses:
Promote simplifying compliance requirements for small businesses; explore ways of increasing access to capital for small businesses, including providing tax deductions for investors; improve small business awareness of currently available angel investor opportunities; increase funding for the Be Your Own Boss scheme so it is available to anyone starting a business for the first time and new migrants; provide ongoing support for Maori and Pasifika service providers and ensure all government information on business compliance is available in Maori and key Pasifika languages.
Kelly Ellis
Labour Party
Everyone loves a bargain but allowing overseas sellers a tax-free competitive advantage is clearly wrong. A level playing field - the goal of any fair society - is a must for retailers and I support closing this way of avoiding tax. Retailers need an MP who will fight to revitalise the town centre.
Notwithstanding that, the decline of central city shops is also contributed to by others factors. High unemployment and low wages have knocked the stuffing out of every business in this great town. This further reduces spending in the city and encourages people to buy elsewhere.
Levelling the playing field with GST being payable on all overseas purchases is undoubtedly a good start, but jobs, jobs and jobs are what this city needs. Without people earning, they can't spend. With a boost to regional development, Labour will create jobs in this town and this will lift retail spending.
Without the competitive advantage of being able to sell tax free, locals will be able to foot it with overseas suppliers particularly when most Kiwis like to support local businesses and, of course, enjoy the customer service and protection that buying local gives them.
Robin Grieve
Act, NZ
The internet is transforming the way we shop. As well as GST, our high minimum wage and intractable employment law is making New Zealand retailers uncompetitive against overseas on line shopping providers.
Prior to the Roger Douglas reforms of the 1980's New Zealand was a protected economy. We built cars and made televisions and overseas imports were subject to a duty to make them more expensive so that locally produced products could compete. The Douglas reforms removed this protection. This did cost a lot of jobs but gave us consumers cheap and better products and because consumers could buy more for less, they spent their money in other areas creating new employment opportunities. The reason this caused so much pain at the time was because our protected economy had not responded gradually to the changing world. The same would happen here if retailers were protected from internet shopping. Consumers would pay more and retailers would be stuck in a time warp.
Retailers that can adapt will do so by changing the way they do business. People shop for the experience as well as to purchase goods. Retailers will have to focus on making the experience even more enjoyable by providing a service shoppers will pay for.
The GST part of the question is difficult. Retailers are at an unfair disadvantage and that must be remedied to give them a chance to compete. Collecting GST from low value on line purchasers is possible but complex and expensive. ACT supports fairness in all things including this and will support introducing GST on all overseas purchases as soon as a mechanism is found. No New Zealander should begrudge paying GST on their purchases because that is how we pay tax in New Zealand, our hospitals and schools need our money.
Les King
Focus NZ
A paper by the NZ Institute for the Study of Competition and Regulation has shown one of the key drivers of e-Commerce is lower online prices. It states foreign retailers have an implicit 15% price advantage over comparable domestic retailers. It also states there is anecdotal evidence of illegally devaluing purchase amounts to enable GST and duties to be evaded.
Focus NZ agrees with all the NZ Institute's findings and views the government's current tax policy as distortionary, negatively affecting government revenue and domestic retailers. We also recognise the significant flow-on impacts on our economy of having smaller retail businesses closing. It's much more than just a loss of taxable income from GST.
Other impacts on government are: tax losses from reduced NZ retail company profit and reduced economic activity; reduced PAYE tax; loss of GST on operational costs associated with bricks and mortar retail outlets; loss of retail jobs, and if not picked up by employment increases in other industries, there's extra cost to government through unemployment benefit payments, and resultant social costs on both government and communities
The main argument against dropping the $400 minimum threshold is the enforcement cost due to manual inspection of all packages entering the country. Focus NZ believes smarter policies are needed. Why not have GST charged on outgoing financial transactions? No inspection is required to ensure GST compliance, collection costs are significantly reduced, and New Zealand businesses are not affected as they simply claim GST back for business related purchases.
Focus NZ will seek to implement GST on all overseas purchases of goods and services. We are committed to creating a level playing field for New Zealand companies, committed to reducing their compliance costs, and committed to making their businesses more profitable.
Chris Leitch
Democrats for Social Change:
While I agree that internet purchases are affecting our smaller retailers, large NZ owned, and overseas owned, retail chains operating mega-stores are also a significant cause. We would provide a more level playing field by scrapping GST ($15 per $100) completely and replacing it with a transactions tax of 10c per $100 on withdrawals from all bank accounts. This would immediately put NZ retailers on a more equal footing with overseas on-line suppliers.
Business would no longer have the compliance costs involved with filing GST returns as the new tax would be automatically deducted by banks in the same way as account fees are already. The new tax would hit particularly the paper shufflers on the money and financial markets who make large profits from speculating on small movements in currency rates and would encourage more investment in productive businesses instead. The NZ $ is the 9th most traded currency internationally with an average of $13 billion traded every day.
The removal of GST would also provide an increase in purchasing power for all households and generate more economic activity, giving our towns a much needed boost. Additionally, our policy of funding local government capital works through no-interest loans from the Reserve Bank, as recommended by the International Monetary Fund report of August 2012, would see the $12 million each year currently paid by our council in interest, available for rates reduction or improving the quality of our retail environment - landscaping, no parking charges, better amenities, etc.
Pita Paraone
NZ First
This issue is not new and in fact the impact of it on business operators' bottom lines and their survival requires urgent attention. The obvious solution would be to remove the present threshold when GST is liable so that all purchases on-line are not exempt from this tax. New Zealand First has never supported the increase of GST from the 10% rate when it was first introduced by its proponents of this tax who stated that it would not be increased. Since then it has increased twice and any further increased would be objected to by New Zealand First. However, this in itself will not necessarily mean that business will survive the effects of a depressed regional economy.
Businesses that are benefiting from the present GST exemption on on-line goods sales will have New Zealand First removing this exemption as we believe that the present system is unfair to those businesses who are not only providing employment but are contributing to our economy. It is a concern for us in New Zealand First that the e-economy brings new challenges, not least to our country's tax base particularly when you consider giant corporates such as Google and Facebook effectively paying minimal tax here in New Zealand.
However, I am aware that GST free limits are not the only reason why shops "on the high street" are closing. Increased rentals by landlords is also a contributing factor together with increasing compliance requirements and costs. New Zealand First believes a review of the Reserve Bank Act is long overdue and will provide the catalyst for addressing the issue posed in this question.
Shane Reti
National Party
The National Party does understand the challenge of online overseas purchases, and continues to monitor the situation closely. The stated $400 threshold was reviewed with public consultation in 2011. At that time the decision was made to maintain the status quo. The difficult balancing act is between lowering the threshold and the cost of collection. The changing face of the high street is unlikely to be caused by this factor alone. Many businesses have simply moved around the city, and these changes create a wonderful opportunity for real and sustained development of the central city in conjunction with the Town Basin.
