Past event: Summer Scholars Seminar
William Steel, Summer Scholar, Victoria Business School
Wednesday, 20 March 2013
Rutherford House, Lecture Theatre 2 (RHLT2)
Lambton Quay, Victoria University, Wellington12.30pm – 1.30pm
The Rise in Foreign Retailing and New Zealand’s GST Exemption: Time for a Change?
In the past two decades the New Zealand retail market has undergone a rapid transformation. What was traditionally bought in stores is now increasingly being bought online. As a result many goods purchased from foreign websites, valued at up to $400 each, legitimately avoid paying 15% GST. Such an exemption creates a distortion that favours overseas retailers over their New Zealand based competitors.
This presentation reported on results from a recent project evaluating the economic and revenue costs of this distortion. It argued that, by diverting domestic spending offshore, the government not only misses out on GST revenue, but also loses out on some company and PAYE tax revenue and is distorting consumer choices. But there are significant collection cost issues when trying to levy GST on low value purchases from foreign retailers. A number of options were discussed on how to collect such GST revenue if New Zealand's foreign GST-free threshold was reduced. The presentation also outlined how a cost-benefit analysis could be made.
Slides of William's presentation are now availble.