Protecting retailers

By Eric Crampton 27/03/2015

Retail NZ spokesman Greg Hartford explains why he believes GST on imports is important:

But Retail New Zealand spokesman Greg Hartford says the proposed online GST idea will help retailers that can’t compete with foreign websites.

He says the cost to the government of not having an online GST system is somewhere above $200 million a year and adds that he expects this figure to climb as online shopping becomes more popular.

“We’re certainly aware of retailers going out of business because they cannot compete with foreign websites.

“We’re also aware of shops having to reduce staffing because of the state of their businesses.”

Mr Hartford disagrees that the higher level of bureaucracy will put smaller retailers off.

“Creating a level playing field isn’t a magic bullet that’s going to solve all the issues facing New Zealand’s retailers but it’s certainly one that is an easy fix for the government that will at least mean that everyone is competing on the same page.”

Hartford would prefer that the threshold be dropped to $25.

Both the above pieces also quote from our recent media release.

I’m not sure about that $200m figure: it would require that Kiwis spend $1.3 billion on direct imports from abroad, or a bit over $300 per capita. Total retail spending in New Zealand last year was just over $20 billion. Is it plausible that 5% of retail volume is direct to consumer imports of low-value items?

I’ll assume that Hartford would wish the abolition of the biosecurity levy and the Import Entry Transaction Fee for lower valued imports – they add $47.29 in transaction costs for any import that runs through Customs processing, and $47.29 in fees on a $25 import (plus $3.75 GST) hardly makes sense. But abolishing those levies doesn’t abolish the associated handling costs – it just shifts them to the general ledger. And without making it cheaper to process GST at the border, a $25 threshold necessarily imposes transaction costs far in excess of the revenues collected – and that’s even imagining that the mechanism doesn’t impose other hassles on customers.

If Hartford, or anybody else, is able to come up with some better way of processing GST at the border, without imposing undue hassle on either those who might be deterred from exporting to New Zealand or on Kiwi shoppers, and without collection costs that exceed the value of GST collected, that would be great.

0 Responses to “Protecting retailers”

  • maybe GST and sales taxes are past their use by date. Financial transaction tax anyone?