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PM can’t calculate GST

Written By: - Date published: 7:24 am, March 18th, 2015 - 66 comments
Categories: gst, john key, uncategorized - Tags: , ,

3 News had a piece last night on the possible eventual charging of GST on online / international purchases. Interesting topic, worthy of debate. John Key was quoted as saying it was “inevitable”. Then he managed to completely put his foot in it:

“If you think about iTunes, if you download a song and it’s $1.29, there’s no reason the GST shouldn’t apply to that. In reality, GST would be 2 cents.”

(See 1:40 in the video.) Our financial genius PM is out by a factor of 10, the correct amount is a shade over 19 cents. That’s a monumental self-inflicted “gotcha” headline – “PM can’t calculate GST”. A Labour or Green leader who made such a mistake would be all over the news…

66 comments on “PM can’t calculate GST”

  1. b waghorn 1

    key must of had his dunces hat on instead of his money counters hat.

  2. Tracey 2

    will he be relentlessly mocked as the greens leadership contenders were for not knowing the inflation amount etc. afterall his party have sold him as an expert on matters economic…

    • felix 2.1

      Exactly, the opposition can hammer this as much as they like but it doesn’t count for much unless the media pick it up and treat it like they did the Green gaffes.

      • Tracey 2.1.1

        at least Brook Sabin tweeted. I didn’t watch any news last night so don’t know if it headlined or not… It wasn’t on TV3 news this morning.

        • Ergo Robertina 2.1.1.1

          Key’s mistake was prominent on 3 last night – in the tenor of the tweets.
          It was part of their GST story – I think they even led on it; it was certainly top one or two story.

          • Tracey 2.1.1.1.1

            Thanks for that ER.

            Anyone know if TV1 ran it and how?

            • Crashcart 2.1.1.1.1.1

              TV 1 did note that he had got the number wrong adn by how much but it was a quick tack on at the end of the article.

              • Tracey

                thanks. do you know if tv1 made an item of leadership conteners for greens not knowing economic stuff?

                • Crashcart

                  Sorry I was away for part of that and am spotty in watching the news at best (kids bed time and all) so I missed anythign about it. Doesn’t mean it wasn’t there.

  3. miravox 3

    He’s been out of the numbers game to long. Must be mortifying for him.

    Time to give up this PM gig and back to the money trading for a refresher.

    • Tracey 3.1

      shows you how important numbers really are to making money in currency trading 😉

      • McFlock 3.1.1

        I’m sure even in the 1980s it was a case of “computer says buy”

        • Murray Rawshark 3.1.1.1

          From memory, it was in the 80s that people began developing econometrics and econophysics to analyse the mass of data from the stock market. Much of what later happened was based on computer simulations of unrealistic models. Some people made huge amounts of money for a short time, but it went badly wrong. This could explain the rubbish right wingers spout about climate modelling.

          A maybe interesting anecdote is that Eugene Stanley, who first used the term econophysics, almost got himself robbed while drunkenly dancing with young women in the street in Salvador, Brazil. My wife intervened and saved the day.

  4. peterh 4

    I think it was tv1 news, also, it was a double wammy as I tunes are paid by I tune cards that have already had gst paid when brought, what has fishi got to say about this joke of the week, bet you don’t hear from him

    • Hayden 4.1

      And according to Apple’s Terms and Conditions GST is already applied, assuming they deem it “payable”, presumably.

      Services Transactions may be subject to GST. If GST is payable, the amount deducted from your credit card, iTunes Card, iTunes Store Gift Certificate, or Allowance Account balance (as the case may be) at the time of purchase will include applicable GST. All sales and rentals of products are final.

      • Lanthanide 4.1.1

        So do the songs actually cost $1.29, or is it $1.29 + GST?

        If the $1.29 includes GST, then the GST component is actually 16c and Brook Sabin is also wrong.

        • Tracey 4.1.1.1

          but isn’t an economic whizz bringing to bear all his economic magicalness to the PM-ship.

        • Hayden 4.1.1.2

          I would assume (I don’t use it) that they are $1.29 including GST. In that case though, Brook Sabin is correct in as much as the GST on $1.29 is about 19c, although he doesn’t appear (and nor do many in the media) to know that Apple already charge GST (if indeed they do). It would be interesting if someone got around to asking Apple about this, although they appear to have been unwittingly dragged into it by the PM.

          I would like to see Key arguing that he was only out by a factor of 8 rather than nearly 10 though.

          Maybe he could do a srylands and claim it’s the sales tax “where I live”. What’s the sales tax rate in Hawaii?

          • Lanthanide 4.1.1.2.1

            No, for something that is $1.29 including GST, the GST component is 16.8c, not 19c.

            $1.29 / 1.15 = $1.12
            $1.29 – $1.12 = 17c

            Without rounding it’s 16.8c, not 16c as I said above. Still, closer than Brook Sabin.

          • ghostwhowalksnz 4.1.1.2.2

            The gst is not paid when you do a completly online transaction.

            Download the itunes app, set it up for in app purchase on your credit card, as its technically buying through an offshore intermediary ( and below the $400 limit) no gst.

        • Hanswurst 4.1.1.3

          Sabin is right, no matter what the actual case is. Key referred to a song costing $1.29, and there being no reason why GST should not apply to that. From Key’s statement, “that” is the song that costs $1.29, and therefore applying GST to “that” means $1.29 + GST. If he had intended it to mean $1.29 including GST, he would have had to have worded it differently. You can’t blame Sabin for calling Key out on exactly what he said.

        • Murray Simmonds 4.1.1.4

          Lanthanide:

          Since when did offshore companies start charging GST?

          Or do you, in your usual myopic way, believe that itunes is a NZ-based company?

          Perhaps your game, really, is simply to mislead?

          In which case you are definitely in the right party for that!

          • Lanthanide 4.1.1.4.1

            I love it when people accuse me of being a rightie.

            Perhaps you should try and read the comment I replied to, which is #4.1 by Hayden. Then read my comment.

            When you have the context for what I said, you might understand it.

      • ghostwhowalksnz 4.1.2

        If its done by a pre purchase card its likely to include gst, if its an in app purchase by your credit card you are technically buying it offshore so they escape gst

    • Tracey 4.2

      Good point indeed. Bad example all round. I bought my last i-tunes card from warehouse so deffo paid GST

      • alwyn 4.2.1

        If Hayden’s comment at 4.1 is correct then you haven’t paid any GST at all when you buy the card. You have merely transferred money from you bank account, or wallet or whatever into a form of money that you can spend to buy tunes.
        If they have to charge GST on the goods you finally buy they will debit your card with the amount of the GST due.
        It is just like taking cash out of your bank account. You don’t pay any GST on the value of the money you withdraw.. You only pay it if you spend the money on something on which GST is payable.

        • Tracey 4.2.1.1

          You sure? I buy an itunes card at Warehouse, Warehouse doesn’t have to pay GST on our transaction? I didn’t know that. So how does Warehouse make money selling it to me? Apple pays them a commission?

          • Lanthanide 4.2.1.1.1

            Easy way to work it out. Most receipts will show the amount of GST charged on the purchase. Work out if the GST is been charged on the card or not.

            If you buy a $10 card and get $10 credit in iTunes, and $1.30 of it was GST, then anything you buy with the $10 credit would have effectively paid GST.

            • alwyn 4.2.1.1.1.1

              Tracey.
              According to the Apple ITunes agreement the card itself is valued at 0.1 cents. I suppose they are going to pay the GST on that value.

              “The Gift Certificate/iTunes Card/Code cash value is 1/10 of one cent.”

              If the things that you buy are liable for GST then they are going to bill it to your account at the time you purchase the service. That is when you choose a tune. Note that they don’t distinguish between an iTune card and your credit card.

              “Services Transactions may be subject to GST. If GST is payable, the amount deducted from your credit card, iTunes Card, iTunes Store Gift Certificate, or Allowance Account balance (as the case may be) at the time of purchase will include applicable GST.”

              I imagine that the way The Warehouse makes money is that Apple supply them with $1,000 of face value of the cards for say $900. Then they can make a profit by selling at the face value. Note I only say “I imagine”. I don’t actually know what they do.
              Did you know that the Post Office sell stamps to dealers at a discount and you can, or could, get the dealers to sell them to you at a discount of say 10% from face value?

              Lanthanide comments that a receipt will list the GST. They used to, almost universally but for many consumer things they no longer do so. A petrol station’s receipt will list it but a supermarket bill, at least from New World, doesn’t.

              • Lanthanide

                Countdown receipt in front of me has the GST total listed. Mitre 10 mega receipt doesn’t. Can’t find my last Warehouse receipt, but when I was there 9 years ago they explicitly listed next to each item whether it had 15% GST charged or not; not sure if they still do that.

                • alwyn

                  I am being picky, and very much tongue in cheek, but I hope you complained to The Warehouse. Nine years ago the rate was 12.5%.
                  I found a Mitre 10 receipt which does not list GST. I am surprised they don’t have a common point-of-sale system.

    • ghostwhowalksnz 4.3

      Its only talking about online only, buying a card is so 1990s.

      Its normally done by a credit card in the setup to become an ‘in app’ purchase

  5. peterh 5

    Cards are inclusive of gst sometimes they are discounted, so they are not always $1 29 each song so the tax take would be less than 2 cents each song, honest John was not on song with this

  6. Craig Glen Eden 6

    It should be remembered this PMs figures are done on the back of a napkin. Who needs financial accuracy when you can spin bullshit knowing full well he is never really held to account for anything he does say’s or is responsible for. This is the PM who his team have spent years creating the Im just like the average Kiwi bloke persona and they have done that so he can make shit up and pass it off as I was just being casual bro!.

  7. her 7

    So illegal downloading will be tax evasion.

    • ghostwhowalksnz 7.1

      if no money changes hands there is no gst payable!

      • Lanthanide 7.1.1

        If things are sold at less than their true retail value for the purpose of minimising GST, it is tax evasion.

        Difficult to see how how it would really work for ‘illegal’ downloads though: stealing something from a shop is shop-lifting, not tax evasion.

        • freedom 7.1.1.1

          I forget, how many zeros have to be involved before it becomes what the PM calls “legitimate tax avoidance” 😉

  8. shorts 8

    I’m sure iTunes doesn’t charge NZ’ers GST – Australians yes… because iTunes is registered and operating in Australia so subject to their GST regime, not ours

    Saying that this whole GST thing is becoming a annual news item… stirs up stories and then dies as IRD and Customs inform their masters (again) that their systems can’t cope with the proposals… offshore sellers such as Amazon say F off NZ, we’re not doing your bidding, we’d rather deny all sales to your country than bother with your tax issues etc (we are not that big nor imprtant – as many sellers won’t even ship here) blah blah blah

  9. Chch_Chiquita 9

    What I don’t understand is how is it going to be enforced. Shouldn’t a company be registered in NZ in order to pay the GST it is collecting, if it is indeed collecting? And if the cards are indeed GST inclusive then isn’t charging GST on the purchase of the songs a double up?

    • ghostwhowalksnz 9.1

      No. For items that arrive like that the buyer is responsible for paying GST.
      At the higher end of the scale, eg for imported used cars, the GST is payable based on the cost overseas plus shipping and is paid by the importer before its released to tthem.

      I dont know about the cards, but its generally talking about online only transactions

      • Chch_Chiquita 9.1.1

        I know the rules about GST when importing goods that physically arrive here, but pure online transactions are not subject to GST and I don’t see how you can force Apple, Google etc to charge it.
        To me it sounds like another idea not thought through and the systems to enforce it will be so expansive it will not be worth it.

        • alwyn 9.1.1.1

          The “so expansive it will not be worth it” is the reason that things up to $400 were exempt.

          Could Apple do it? I think that they do it for items sold in The United States where the states charge sales tax at different rates, so I don’t see why they couldn’t do it here.
          Why would it apply to Google? I wasn’t aware they sold goods in this way.

          I wouldn’t personally care about paying it. The only things I buy from overseas via the Internet are books and DVDs. I do it because the shops in New Zealand don’t stock them and won’t order them.

          • infused 9.1.1.1.1

            You’d just use a VPN or change your country to the US then… cheaper. It’s already done through Steam to take advantage of regional pricing.

            People aren’t stupid these days.

            • alwyn 9.1.1.1.1.1

              Yes, of course.
              I was really only reflecting my own experience which, as I noted, was only buying goods that are actually delivered by snail-mail.
              The subject is of course much wider and as Key was talking about is the purely electronic delivery that Apple does.

  10. adam 10

    Here me thinking Key was being honest for once in his career. Of course the rich never pay the full amount of G.S.T – for them, less than 2% – sounds about right.

  11. David 11

    Epic fail for sure, however what about the fact that the stated reason for applying GST to these exempt on-line purchases is to level the playing field for our domestic retailers. This will mean the cheer leaders of the FREE market are happy to make it less free and assist our poor retailers when it increases their revenue intake. How is any market free when inflation and interest rates are artifically controlled anyway?

  12. ianmac 12

    By the way did you notice that Mr Key in mocking the Green candidates lack of knowledge of those other stats, had to read the stats in case he made a mistake. And my guess is that if you asked any MP for the figures very few would have them at the ready.
    And Key’s error in GST is just relevant because of his mocking of the Greens. Irony?

  13. alwyn 13

    I would think that the majority of the MPs, or at least those in their second or later terms, would know the inflation rate and the OCR exactly. Both of them have been discussed at interminable length in Parliament lately.
    The unemployment rate and the GDP growth are a little bit harder but to be as far out as Hague was is ridiculous. He gave 0.25% when it is 2.9%. That is letting his political bias blind him.
    Shaw’s estimate of 5% is the only one of their guesses that is even remotely acceptable from an MP who hopes to lead the third biggest party in Parliament. I’ll bet Norman was holding his head while he cried at their stupidity.

    • Hayden 13.1

      Would you also think the PM (in his third term, as it happens) would know the rate of GST? And how to apply it (at least roughly)?

      • alwyn 13.1.1

        I’m sure he knows the rate. He simply made an error in a simple calculation. His error is just like the one Meteria made in Parliament, except that she made the mistake by missing out some words in the question she was asking. Key made fun of her there at the time, just as people here, and probably in Parliament, will make fun of him about the GST.
        The Green Party candidates were given plenty of time for their answers and Hughes was even offered a second chance. They simply didn’t know. It wasn’t that they made a simple slip.

        • Murray Rawshark 13.1.1.1

          They simply didn’t know. It wasn’t that they lied and obfuscated like FJK does with every question he’s asked. FIFY.

          • alwyn 13.1.1.1.1

            If it was simply a case of “They didn’t know” they should say that and then shut up. Only Hague came even close to that but then he gave a wildly silly figure that merely illustrated his political prejudice. The rest merely illustrated the truth of that old saw that “It is better to remain silent and be thought a fool than to speak out and remove all doubt”.

            Hughes of course confidently gave a silly number. I thought he was equally funny a minute or so later when he happily spouted some rubbish about the Reserve Banks available “Macro-Prudential” tools. I wonder in which comic he had read that bit of jargon? It is a shame he clearly doesn’t know what he is talking about.

            • Murray Rawshark 13.1.1.1.1.1

              The big difference is that they accepted they didn’t know. Key would have bullshitted and said that the published figures were not the actual ones, or that Treasury worked them out differently, or something equally ludicrous. Then he would have told us how comfortable he was and said that ordary Nuzildas didn’t worry about whether he told the truth or not. In your case, he’d be right.

  14. David H 14

    But don’t forget that Billy boy still hasn’t got to his much Vaunted surplus yet, so they need all of the Grab Snatch & Take they can get.

    And now the price of Milk Solids has dropped approx 10%. So there’s another dent in Billy boy’s books.

  15. Kevin Welsh 15

    At least we now know that when asked for his ‘2 cents worth’ on any topic, he knows SFA.

  16. infused 16

    Well you all stuck up for Metiria when she fucked up her calculations, so what’s the problem?

    • weka 16.1

      Do you,

      1. really believe that Turei thinks 90% of NZ children don’t have lunch at school?

      or

      2. think your misleading slur has any meaning here?

      Either way, you’re an idiot.

      • infused 16.1.1

        Well obviously she did. She read it out.

        Do you think I give a shit about your insult? Try harder idiot.

        • weka 16.1.1.1

          No, she didn’t. Why are you lying? And why do you believe that Turei thinks 90% of NZ children don’t have lunch at school? That’s just stupid.

          I have no idea whether you give a shit about being insulted, but let’s see how long you put up with having your stupidity laid out for people to see.

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  • Taita College to benefit from $32 million school redevelopment
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  • Redeployment for workers in hard-hit regions
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  • New District Court Judge appointed
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  • $206 million investment in upgrades at Ohakea Air Force Base
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  • Review of CAA organisational culture released
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  • New Board appointed at Stats NZ
    Ensuring that Stats NZ’s direction and strategy best supports government policy decisions will be a key focus for a new Governance Advisory Board announced today by the Minister for Statistics, James Shaw. The new Governance Advisory Board will provide strategic advice to Stats NZ to ensure it is meeting New ...
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  • New Principal Environment Judge
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  • Digital connectivity boost for urban marae
    A programme to connect marae around the country to the internet has received $1.4 million to expand to include urban marae in Auckland, Wellington and Christchurch, Broadcasting, Communications and Digital Media Minister Kris Faafoi and Regional Economic Development Minister Shane Jones announced today. The funding for the Marae Connectivity Programme ...
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