Here is Eric Crampton opposing calls to create a level retail playing field by charging GST on all purchases, whether the seller is based in New Zealand or based overseas:
Does this create an uneven playing field for New Zealand retailers? Yes, as compared to a world in which tax could be collected costlessly. But consider the real world!
Ordering higher valued products from abroad means they will be held up at Customs until GST is paid. The quickest payment option is the online credit card service which attracts a 2.5 percent convenience charge. Internet bank transfers are cheaper, but require the customer to take the separate step of logging into online banking, making the payment, then waiting for Customs to notice that payment has been made. Or, you can drive across town to your nearest Customs office. All of these methods also attract a separate Import Entry Transaction Fee of $29.29 (including GST) and a biosecurity levy of $17.63, regardless of the value of the import. That hundred dollar import that was undertaxed by $15 suddenly would attract not only $15 in GST, but also $47.29 in transaction charges.
Oh noes, the slippery slope! If you charge them $15, they’ll end up having to pay $62, because path dependence. That’s nonsense.
Eric’s argument only holds if you believe all other aspects of Customs operation are set completely in stone, and are immutable to a change in the GST rules. One very simple thing you can do to remedy the particular worry Eric has is to exempt the newly-GSTable transactions from the Entry Transaction Fee and the Biosecurity Levy. Customs doesn’t currently collect those levies on those goods anyway, to there’s no financial loss there.
On the broader point of compliance costs, many of the big global shipper-retailers (Amazon is the prime example) already collect tax at point of sale across masses of different jurisdictions. It would not be difficult to add New Zealand to that list. Doing that for just a few large retailers solves around 80% of the problem, which is better than the 0% of the problem Eric’s Chicken Little act solves. For the remaining ~20%, creating a new streamlined process, either through the banks or through Customs, would be the way to go.
Eric is right on one thing, though. Once you’ve done this stuff, the extra government revenue will be about zero. But the point here isn’t to raise money, the point is to create a level playing field, where New Zealand-based retailers get a fair fight. Governments do all manner or revenue collecting that doesn’t raise much revenue (imagine the cost-benefit on chasing delinquent fines all over the place…), and they do it when there is something else important at stake. There is here.
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