Quote:
Originally Posted by BearMountainBooks
These changes are hard on us Indies and very confusing...
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I know you are referring in the main to sales through the likes of Amazon and Kobo, but moving aside a bit to independents that sell soft products through their own websites to foreign purchasers in another country the following outlines a behaviour which is likely to become available to them and similar suppliers.
Large suppliers into the foreign market may decide to comply by collecting and returning the GST/VAT to the foreign country's Revenue but that never because they legally have to (unless in the unlikely case of their own country enabling its own legislation requiring their own tax residents to comply with the tax legislation of a foreign Government), but because they have other reasons such as image to their consumers, that compliant image hopefully producing a return. Therefore it is likely that the market price of the product in the foreign country will increase (in NZ's case for soft products by an amount influenced by the 15% GST, the extent of compliance and the elasticity of the market).
Therefore the sensible choice, having responsibility to its shareholders, employees, etc. of a business is to increase its own price for the product according to the change in the market but not collect it as, or return it as GST/VAT to the foreign Revenue. So, for suppliers doing this, this provides an opportunity for legally won windfall profits generated by the unenforceable tax legislation of the foreign country. Furthermore, the increase in their profits will increase their tax liability to their own country's revenue so increasing the social wealth of their own country (as will the increased earnings won from increased export prices)
To some extent I am surprised that NZ has taken their approach as they, unlike some other countries doing the same, pride themselves on the simplicity of their tax system for easy compliance and reduced opportunity for avoidance, and strive for that; hence, for example, their single rate GST with few exemptions (financial transactions and second hand goods being the main ones).
While there is an obvious concern about tax leakage due these cross border transactions the approach has resulted in increased complexity for foreign suppliers that choose to comply, a situation where it is unlikely that foreign suppliers can ever be audited or compliance enforced in law (nor perhaps even information collected where a tax information sharing agreement exists between the two Governments), and probably much freedom for those that choose not to comply to win windfall profits legally to the extent that the market price moves upwards.
In all, it does look to me that a good part of NZ's action is actually a publicity stunt of a "calming the natives" nature (as I mentioned was the informally expressed view of a tax specialist).