Larry Williams: Consumers set to lose out with online GST

The logo of the online retailer Amazon. Photo / Getty Images

The Government has put out a discussion document applying GST to online shopping.

Currently anything with a value of less than $400 doesn't attract the tax, but Revenue Minister Todd McClay says he wants it more widely applied.

He says taxing services is easier but applying it to goods is more difficult. He says there are now so many goods coming across the border which is unfair to GST paying local retailers and it threatens jobs. McClay says no one else in the world has found a policy of successfully taxing goods.

He says New Zealand's losing an estimated $180 million a year - and climbing - from online business transactions, and bricks and mortar retailers are also suffering from unfair competition.

The first wave will hit digital services like music, videos, software, and accounting. There's $40 million in tax right there. The plan looks like a juicy proposition for the government.

Under proposed changes offshore suppliers of services would have to register and return GST on purchases by New Zealand-resident consumers.

Retailers have been whining about there not being a level playing field for years and the government has buckled. But lets not sugarcoat this, it's a straight out revenue earner.

I doubt the GST on online goods and services will make a blind bit of difference to bricks and mortar retailers here. According to Statistics NZ data, the value of goods and services purchased online has been rising at more than 20 per cent a year for some years. That suggests that retailers won't be the beneficiary of this policy, but the governments coffers will do very well.

Collecting GST on digital services is easy to implement. Goods is another matter. It will have to be collected at the border. 12 million parcels a year currently cross our borders. The cost of collecting the tax could be more than the tax collected.

The government needs to be careful. The rules need to be simple for consumers. A complicated system could deter foreign retailers from shipping to New Zealand. New Zealand is a small market and is expendable. I kind of think local retailers would like to lock foreign retailers out of the market if they could.

A level playing field is fine, not one the deters online shopping.

People shop online because there is more choice and its cheaper - consumers will be the losers if we impose too many hassles for foreign companies.