Is it time for Amazon tax?

“Staggering” is how summer research scholar William Steel describes the tax effects of not collecting GST and duties on goods bought on overseas websites.

Currently, purchases worth up to $400 can come across New Zealand’s borders for free because the costs of recouping the GST or tariffs on them are seen as prohibitive.

William’s analysis of overseas research suggests ending the exemption would lead to a 27 percent increase in demand for online products bought domestically—in addition to the tax revenue that would be gathered—and a corresponding decline in demand of 45 to 60 percent for products bought offshore.

While that would be good for retailers, William says there is a downside for consumers in terms of cost.

“However, my study shows that, while lower prices are important to people shopping on overseas websites, the biggest driver of e-commerce is greater product availability and selection.”

His research also looked at solutions to the notoriously difficult issue of where, when and how to recoup the tax on overseas sales.

“Adding GST and duties to a credit card purchase seemed a no-brainer to me at the start, but there are all sorts of reasons why that’s impractical,” says William.

Instead, he says, there are ways to make the current collection system more effective—including developing a multilateral agreement on a sales tax take with New Zealand’s trading partners and changing the way the de minimis threshold is defined.

Booksellers New Zealand CEO Lincoln Gould, whose organisation part-funded the Summer Research Scholarship, says William’s work provides information that will be useful to informing debate about the issue.

William’s supervising team included Dr Toby Daglish, Research Director for the Institute for the Study of Competition and Regulation, Bronwyn Howell, the Institute’s General Manager, Dr Lisa Marriott from the School of Accounting and Commercial Law and Professor Norman Gemmell, Chair of Public Finance at Victoria.