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Online trading – again

Once again the issue of internet purchases coming in to NZ GST free is hitting the news.

See here

In my view this needs to be addressed. The size of the problem will only increase. Having any kind of exemption like this distorts our GST system and favours some at the expense of others.

But in finding a solution we have to consider the treatment of services which are imported into NZ. More and more imports of physical goods like books/DVD’s are being replaced by electronic downloads.

There’s a huge difference between the treatment of importing a physical book and importing an electronic book.

The GST free threshold for private imports of physical books is up to $400. However, electronic books with a value up to $60,000 can be imported privately before any GST applies. The same applies to any physical product for which there is an electronic alternative.

In my view Governments with VAT/GST systems need to be addressing these border issues on a multilateral basis, in a similar way to how double taxation is dealt with by Double Tax Agreements between States.

That will be a lengthy process however and in the meantime hard practical solutions are required if a country is going to ensure foreign retailers compete fairly with domestic retailers for the same consumer dollar.

Yes there will be administration and collection costs but that could be the cost of having a system which is fair to all.

Iain

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