Monday, November 16, 2015

A huge implementation problem

The government introduced its bill today to collect GST from online services. The basic idea is that overseas suppliers of e-books, video, software and other intangibles will be required to register for GST, and charge it to NZ customers, if they do more than NZ$60,000 of business with New Zealanders a year. Its a reasonable measure, designed to plug the hole in government finances posed by the internet, and one I support. At the same time, there's an obvious problem with requiring e-tailers to register: what if they don't? What if they instead decide that its just too much hassle to deal with the NZ government for that amount of custom, and simply start geo-blocking or refusing transactions with NZ customers? This already happens for physical products for businesses who don't want to think about postage, so its a real possibility. And it basicly puts kiwis in the position of either not buying the stuff they want, or becoming tax cheats.

To give a concrete example: as some of you may have worked out by now, I'm a gamer. The past decade has seen a real shift in roleplaying games from physical to digital products, and the online market is dominated by two quasi-monopoly providers: DriveThruRPG and Kickstarter. While there are other providers, a lot of products are listed on only these platforms. I'm fairly certain both will be well above the threshold, but what if they refuse to register? I'm faced with basicly three choices: give up my hobby, piracy, or tax evasion. Which is a pretty uncomfortable place for the government to put me.

While I'm not a computer gamer, I expect a similar question arises with major online game delivery systems such as Steam.

As Netflix's attempts at geoblocking showed us, the internet finds solutions for geographical problems - which means tax fraud will be a very easy option. But is the New Zealand government really going to try and criminalise people (with a penalty of five years imprisonment and a $50,000 fine) for evading website geoblocking to buy stuff? Doesn't that seem disproportionate and draconian?

If offshore websites register, that's great. But if they don't, punishing New Zealanders who do the internet thing and keep on buying stuff from them simply isn't on.