Options for extending GST to online sales put on hold

The US Federal Reserve's “tapering” announcement will add to local political nervousness over extending GST to items bought offshore.

Local retailers are pushing for the 15% GST to be imposed on items bought from overseas – usually via online shopping. At present items worth less than $400 are exempt.

Local clothing retailer Hallenstein Glasson chief executive Graeme Popplewell delivered a broadside on the issue last week, saying the revolution in the way people now shop means the government cannot afford to avoid this issue much longer without damaging local firms.

Calling the absence of GST on online, offshore sales a “failure of the tax system,” Mr Popplewell says it's a factor in his firm’s recent downgraded profit forecast.

Offsetting that argument is the stark fact adding  GST to such purchases will be seen as a tax grab and will put up prices: something not likely to be overwhelmingly popular.

The expected “tapering” of US stimulatory monetary policy – which was finally flagged yesterday morning – will also be having an impact on political calculations: any tapering is expected to see a drop in the New Zealand exchange rate and a resulting rise in the cost of imports, even without putting a 15% tax on the top.

Inland Revenue was to have released a paper outlining options for the policy by the end of the year: the National Business Review understands nervousness about political blowback - one source says the “political ****storm” the issue has caused in Australia has had a major impact on government thinking – means the issue is on hold until after the election

MORE ON THIS ISSUE IN THE NATIONAL BUSINESS REVIEW PRINT EDITION TODAY.