Nash Stuart: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In CommitteeText is incorporated into the Bound VolumeNash Stuart: Taxation (Residential Land Withholding Tax GST on Online Services and Student Loans) Bill — In Committee[Sitting date: 12 April 2016. Volume:713;Page:10411. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier): I just want to build a little bit on what Mr Faafoi said in his first contribution. It is generally recognised that GST should apply evenly across all consumption. GST is what they call basically a tax on domestic consumption. There is a destination principle which means that you tax the good or the service in the country within which it is consumed. It makes sense; we all understand that. That is why this tax has been brought in and this is why we do have such a problem with the non-taxing of tangibles when we think we could have gone a lot further.One of the interesting things that the Inland Revenue Department (IRD) commented on—it said: “The proposals could impact on the level of competition by discouraging offshore suppliers from entering or continuing to supply to the New Zealand market. However this impact may depend on the extent to which compliance costs are imposed on offshore suppliers and the extent to which consumers alter their purchasing behaviour in response to the change.”I do not know whether that has been put in as an advantage or as a disadvantage. I would say that if this sort of law encourages New Zealanders to actually purchase domestic intangibles which is what we are taxing here then surely that is not necessarily a bad thing. What we absolutely want to do I would have thought is to encourage New Zealanders to purchase domestically. In fact as mentioned one of the principles about this is fairness and equity. The IRD talks about fairness and equity a lot.One of the things that came up a lot in the Finance and Expenditure Committee was the effectiveness and fairness of this option. We talked long and hard about this. One of the big questions I suppose is: would offshore companies actually pay this? How could we be sure that a Netflix or an Apple or any other large supplier—officials reckon it is about a hundred companies—would actually comply? The interesting thing is that when we looked at overseas examples we were told that particularly large international suppliers account for the majority of these cross-border services. I think that if we think of Apple and downloading iTunes etc. that is probably right.We were told they have a willingness to comply and we were told that for these suppliers failure to comply with their obligations would pose a significant risk to their reputation which I suppose could be right. But it is an interesting comment when you consider that the Googles of this world—and Facebook and Apple—do not pay any tax anyway. They do not seem to care that their reputation may be sullied because they do not pay tax in a country because they live on the strength of their brand. They have all got massively valuable brands and it is why they can get away with paying no tax.Where this sort of fell over was Starbucks in the UK when it was actually shamed into voluntarily paying more tax because there was a consumer boycott of its stores. That is the power I suppose of consumer action. But I doubt—and I could be wrong here—that companies like Apple like Facebook and like Google really care about their international reputation in New Zealand on whether they pay tax or not. That may change when a lot of the OECD work on base erosion and profit shifting comes to fruition but at this point in time I think what they care about is the goods and sales that they can sell into the country.I would like to talk about the impact of this and some of the underlying data around it. There is an acknowledgment—and I think it is fair enough—that because of data limitations it is not possible to accurately determine how many offshore suppliers may be required to register and return GST but from experience in similar countries the IRD has calculated it is probably around about a hundred offshore suppliers that may register for GST. Again owing to the data limitations we just do not know the value of offshore purchases and how much money this will bring in or how much we are missing out on. Again the best estimate of the IRD officials is around about $270 million of purchases. It is quite a lot when we think about it. Those are purchases of services and intangibles. We are not talking about tangibles here; just online stuff. The estimate means that there is around about $40 million of GST that is forgone in these purchases and again there is an estimate that online purchases have grown by about 10 percent. Is it not interesting? We think that there is $40 million in forgone GST and this is only on intangibles. Imagine what it would be if we charged GST on tangibles. I think you would find it would be at least double that.