Rip Off NZ – Plans to add 15% sales tax to overseas internet purchases

You’ve gotta hand it to the NZ government, with such a small population it definitely has to come up with innovative ways to raise revenue.

New Zealanders already have the inconvenience of limited choice combined with the harsh sting of high prices. They enjoy being able to buy goods over the net that they can’t obtain in this remote country. Additionally, local retailers take advantage of the local market by overcharging wherever they can get away with it.

Items New Zealanders like to buy from overseas include pharmacy products (local prices are exhorbitantly high) clothing, music, children’s toys, software, make up, car parts and many other items that most of the developed world takes for granted. These aren’t luxury goods by any means.

Now the government plans to charge 15% GST on all overseas purchases under $400 because local retailers are complaining they had to add 15% to their price. They say they unable to compete in a worldwide market that doesn’t charge 15% GST. They want a level playing field where they can continue to milk the restricted market on their doorsteps. This smacks of money grabbing, self serving protectionism. It is a return to the dark days before the free market reforms of the Muldoon era.

The Local retailer’s argument has one major flaw -local sales tax has already been paid on these items in the countries in which they are bought. Currently because of the relatively high NZ dollar it is cheaper to buy clothing from the UK, pay 20% VAT and ship it over than it is to buy it in New Zealand.

The NZ government is also keen to get in on the act because it reckons it can earn another $200 million a year by putting the screws on local consumers.

How much did it spend on getting the Hobbit production to remain New Zealand?

The NZ public is justifiably outraged by this proposal. Here are some of the comments they’re making, please feel free to add your own thoughts. What do you buy on-line and why?

NZ Herald

SouvenirYank
“Let’s be honest about this, we don’t shop online to avoid GST. When I buy things overseas, I’m often paying tax there and adding shipping costs on top anyway. Yet even after all that, it’s often 30-50% cheaper and I have far more options to choose from. Adding GST might narrow the gap, but not enough to make it equal.
Looking at some outdoor gear recently, NZ stores were asking $300-350 for what I wanted. Stores in the US were charging $95-125 (US$75-100) for the exact same brand and model. That’s not a GST issue; it’s not an exchange rate issue; and it’s not a shipping issue. There are other factors involved that a 15% GST isn’t going to fix.
Then besides the price, the options in New Zealand are minimal. Heaven forbid that you fall outside ‘normal’ sizes! We hear time and again that NZ is not a large enough market to justify having other options, but that’s total rubbish. Auckland is nearing 1.5 million people, yet even much smaller cities in the UK and US manage to stock greater variety.
 The real problem is Kiwis are finally waking up and realizing that they could have it better and most NZ companies are failing to adapt. Sure, add GST, but it’s not going to change a thing.”
Lunar One 
“I have made several purchases online for software that are not available or made in New Zealand.  Each purchase is converted to NZ currency and added a bank fee or some administration fees of $20 for the transaction.   The purchase is downloaded through a line and Internet connections that are paid for by me.
 Nothing in this transaction solidifies any labour or material provided by local retailers. Their imposition therefore is none other than protectionism and parasitical on the free open market. A desperate approach to a share of the market but having nothing to offer is outright dictatorial. It won’t encourage local consumption, but may increase underground retaliation.”
Odette (Auckland Region) 
“Wonderful… just how many additional bureaucrats will need to be hired to conduct this cash grab? Logistically this is a nightmare!
Why not be brave enough to look at the reasons why internet retailing is taking off?
It’s because cash strapped kiwis are looking for variety and a good deal. A good deal that can be found in the USA and UK, but because of the rules and regulations in our own country (not to mention greedy commercial landlords and outfits like Westfield taking their Shylock like pound of flesh out of kiwi based traders) – the costs of retailing are passed onto the consumer.
We have little variety and when the dollar is good you can land a pair of Ray Bans for example for about a third of the price and have it sent to your door. This brings me to the extortionate price of car parking in Queen Street and Newmarket. A look around the shops costs you $8 -$16 if you don’t purchase.
Thanks govt/IRD you’ve officially come up with another way of screwing the public.”

Trademe

muppsy007
“Since there’s a lot of retailers here selling items to the NZ public that are easily purchased off-shore, I thought I would see their reaction to this.

http://tvnz.co.nz/business-news/tax-rules-overseas-purchases-may-tighten-5504431

The thing that raised my eyebrows was this comment:
“partly out of a concern local retailers were having to compete with overseas web businesses on an uneven playing field.”

This is struck a chord with me due to a purchase I made only a couple of weeks ago from an Amazon retailer. The item was a pair of sun glasses. Prada. After converting to NZD and delivery to my door, the bill was around $210 NZD.

My first port of call for these were actually 3 local retailers in Auckland. They all stocked the exact model. Priced at $595.

Now I understand there are market dynamics. I know there’s such a thing as supply and demand. And I know for a fact that some local business price these widely available items as best they can given their costs. (Hell, they should all be at least 15% more expensive right?)

But no one will ever be able to convince me that NZ’s geographical and economic climate is worth a 300% price difference to this “uneven playing field”. That’s simply complaining about not being able to fleece people because businesses are too lazy to meet what the market has become.

This is just one example. Many products are not near as bad as this. But there are others and this is my 5th or 6th reasonably priced order from Amazon. I’ve ordered everything from car speakers, to camera gear for the above mind-boggling differences. If NZ retailers were a little more expensive than overseas vendors – even after GST added, I would (and do) definitely buy here. The speed and local after-sales support is worth it.

But products marked up to levels one can only described as opportunist and lazy? No sale.”

Rikimeyer
“I bought a pair of sneakers from ebay last week. Cost including delivery was half of the NZ retail price. Who are these retailers that are missing out? Australian malls & stores situated here in NZ?

I want to buy a NZ product that is a deleted line here in NZ but still available overseas. The cost is half that of what it was here in NZ, when it was available.

If we could buy our own frozen goods from overseas I’m sure we’d all be buying our lamb and butter from an online website as Aus & the UK have much better prices than here, even after the hefty transport costs.”

hhb
“Well I am flabbergasted at this but here’s why I purchase heaps of my kids clothes online:  I purchased a whole uniform for Missy6 (excluding shoes, BUT including, cotton skort, cotton polo tshirt, cotton cardigan,cotton wool mix tightsx3 pairs, all from Marks & SpencersUK and all absolutely fabulous quality, washes up superbly, hardly a sniff of cheap nasty polyester ^$#@!…all for the astonishing amount of $32.00 including postage BUT had to purchase the school logo’ed polyester ( “had to be MADE in NZ, BOT dictate”)  polo tshirt and this ALONE cost
$48.50 + $6.50 all the way from across the North Island to HB. The retailers need to stop being so darn greedy and be realistic with their pricing, sooooo many goods here from clothing to home décor are such a utter rip off and it’s no wonder we would all rather shop online, I have zero sympathy for whinging retailers. I think those of us that have lived overseas and come home especially notice the rort that is the NZ retail system. The Govt can see a nice big wad of $$$ to be gained by bringing this tax in I guess that the retailers have been requesting that this be done asap.”

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14 thoughts on “Rip Off NZ – Plans to add 15% sales tax to overseas internet purchases

  1. In many cases, New Zealand prices are high because of the government’s incestuous relationship with large importers. NZ Customs and CBAFF (Customs Brokers and Freight Forwarders Federation of New Zealand) have an incestuous and cozy relationship. Like so many government functions, New Zealand chooses to let the private sector set and enforce policy, as long as it gets a cut of the action, and doesn’t have to perform any government regulation or oversight. Big importers (there are generally just 2-3 in any product segment) get free reign to import and resell at very high margins, limit supply and choices to whatever maximises profit; and the government pretty much coerces small operators/importers into using large importers and freight forwarders (CBAFF) thus protecting the stranglehold. Small importers can’t get economies of scale, and the government effectively allows the big players to squeeze them out. Government avoids the need to exercise oversight and regulation, as they have a good-ole-girl relationship with the key players. Many retailers get charged more than what retail prices are overseas, and then are fortunate to get margins of 5-15% if lucky. Meanwhile, the wholesalers/suppliers are gobbling up enormous profits.

    In the final analysis, it’s just the typical kiwi gang mentality.

  2. I noticed that returning things that were not suitable or defective –> no problem anywhere but New Zealand. In NZ, they will argue with you about it!

  3. The price of everything seems to go up daily instead of weekly. I would estimate that you would pay at least double what they cost in the uk for everything even with the exchage rates taken into account.

  4. I’ve been making purchases overseas for years, ever since I
    discovered that the textbooks I needed for my studies were anywhere
    from 30%-400% more expensive if I purchased them locally, and that,
    without exception, they had to be shipped in from overseas. More
    recently I won’t buy ANYTHING locally if I can avoid it; the prices
    are severly overinflated and the customer service from local
    merchants is shockingly bad; it is easier dealing with merchants on
    the other side of the world, who often don’t speak English as their
    first language, than dealing with local merchants. Interestingly
    the only problem I have had buying online and shipping parcels from
    the other side of the world has been when those parcels reach New
    Zealand. Many of them take longer to get from Auckland to
    Wellington, then they do to get from England, China, or America to
    New Zealand. One parcel in particular (from Amazon) comes to mind;
    it took 3 days to get from Los Angeles to New Zealand, and 3 weeks
    to get from Auckland to Wellington.

  5. M&S are doing free delivery to NZ and Australia
    with no minimum spend, they have a sale on beachwear. Even with 20%
    vat its still cheaper.

  6. wow this is very… backward. I’ve been living here for 6
    months and I’m surprised to find software and electronic stuffs are
    very expensive. even worse, most medicine you see in the pharmacy,
    they are not genericized and manufactured in india. how greedy is
    that?

    • Calvin please could you provide our readers with some examples of pharmacy prices so that they may see how high they are? thanks.

      Here’s one example we found for Vicks inhaler, UK£2.65 converted at current exhange rates is NZ$5.05, yet this product retails for more than twice that in New Zealand.
      vicks in NZ

      vicks in UK

      • I consume paracetamol regularly and upseted when found out
        they don;t sell the genericized ones, the ethics paracetamol
        couldn’t be found easily in the pharmacies. they mostly sell
        branded ones like panadol which is unfair to consumers. I will pick
        phamplet from the pharmacy next week.

  7. Not to mention the selection and quality here is not good!
    Everything needs to line dry. Seriously? In a climate that’s cold
    and damp all winter, where do I line dry my clothes? Bedsheets?
    Insane! They must go in the dryer or else they smell like mildew
    and never dry completely. So I buy them overseas. I don’t mind
    paying a little more for quality and to support local merchants.
    But paying double for 1/2 the quality I will not do. Step up
    NZ.

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