A proposed tax planned to come into effect October 2019, known colloquially as the ‘Amazon Tax’, could add taxes to books and other small goods under $400 bought online. The tax would be beneficial to independent booksellers who have long struggled to compete with Amazon.
According to Revenue minister Stuart Nash, this plan will close the tax loophole, which allows people to buy small items online and bypass the 15% tax imposed on goods sold in New Zealand Stores. Nash says, “Small businesses such as bookshops have convincingly argued they are penalized by a system which is badly out of date.”
The current system allows goods under $400 to be bought from large international online retailers without tax having to be paid. This system has been in place because it was thought that the cost of collecting these small taxes would be more than the revenue they would generate. However, with the boom in online retail (18% growth over 5 years) this loophole has heavily affected local retailers. Under the new tax plan, the large online companies would be responsible for collecting the tax. A similar tax plan was implanted in 2016, known as the ‘Netflix tax’, charging online streaming services 15% tax.
Despite the planned tax, Sue Chetwin, Consumer New Zealand Chief Executive, says it will not make a huge difference to how Kiwis buy goods as she believes many individuals use online retailers like Amazon not for the price but for the quality and choice. She believes people will continue shopping online for items they cannot get locally. However, she also believes the new tax could be beneficial for local retailers; she believes if the price of an item is similar, consumers would rather purchase the option they can touch and get quickly. In other words, the local option.
However, in the wake of the changes in tax regulation, which will come into effect on the first of July, Australia is facing a backlash from Amazon. The company said they would block Australians from buying from any Amazon overseas websites, including the main Amazon.com store. Because New Zealand does not have a local Amazon website, the retail giant could pull out of the country completely.
Satyajeet Marar, the Director of Policy for the Australian Taxpayers' Alliance, views Amazon’s decision to restrict Australian consumers as a warning for New Zealand. She expressed her concerns about this prospect, stating the tax plan is now in peril due to this potential decision. She said, “If this happens in New Zealand, Kiwis will be denied access to about 500 million products, most of which are unavailable locally."
At a parliamentary committee, however, Nash commented on the Australian situation and told the MPs present that there may be a risk when dealing with large companies. But the MPs should not worry just yet.
“I've read what's happening in Australia with interest, but we'll just have to wait and see what happens at the end of the consultation," Nash said.
Nash continued, mentioning that people should remember New Zealand would not be the only government to collect taxes from large companies like Amazon. He said, “A company the size of Amazon will be collecting either a GST or a VAT or state sales tax, or whatever, for probably every state in America, let alone a lot of the other jurisdictions around the world."
Despite the continued push for the plan, Nash acknowledged the importance of Amazon and how it would not be in the best interest of New Zealand consumers to be blocked from using the online retail site.
The New Zealand government is still consulting over this proposed tax change, with public submissions being due on June 29th.