Nothing is certain except for death and taxes. - Benjamin Franklin
(Thanks, Benji. Took you a while to figure out where you stood on slavery, but not taxes.)
New Zealand has made changes to its tax laws. The taxman has more to collect - tens of millions of dollars more, and from companies around the globe (as opposed to companies in New Zealand).
Revenue Minister Todd McClay said the update was about ‘fairness and equity’.
As much as it pains me to get behind a piece of legislation that’s going to cost the average Kiwi a few dollars more for online services, I have to. Todd McClay is right.
I’m going to recruit a few characters for this next bit; employ every theatrical trick in the book to justify a whole article on the why behind tax legislation. (God, help me)
I do not use profanity in my novels. My characters all go to church. - Nicholas Sparks
(We have very different definitions of profane, Mr. Sparks)
So here they are, my characters:
The Taxman: I imagine the Taxman is tall. Thin, but not skinny. Suave, with a certain charm about him (think of him as bang in the middle of the imaginary-character-scale from Santa to Grim Reaper). Intense, but still the kind of guy you’d run into at a bar, sipping a double bourbon at noon.
Steve: Steve, my imaginary tax official, slogging away at a desk in the bowels of Todd McClay’s department, has got no charm at all. He’s gangly, loves cheese, has messy hair, and a pair of glasses that yell Harry Potter.
The setting: Early 2015. A bar at noon, since we’ve established the Taxman is that kind of man. Steve doesn’t have a reason. He’s in the bar just for this story. Easily the coolest thing that has happened to him in years.
‘Celebrating?’
Steve looks over to the man sitting in the corner of the bar and shudders a little. Trust me, this says more about our Steve than it does the stranger ‘Yes’, he says, ‘how did you know?’
‘I’ve got a nose for these kind of things’ the stranger says. It’s true. Taxes have a smell. Like blue cheese. Or ketchup.
Steve pulls a little bottle out of his jacket and pours something into his cosmo. He thinks he’s being inconspicuous. Come on, Steve.
The stranger pauses.
‘Did you see the sign outside?’ he asks, smooth as the bourbon he’s drinking ‘no outside drinks allowed in the bar.’
Steve gets a little defensive. ‘I really don’t see what that’s about, it’s just a little water.’
‘It’s not the bartender’s water’ the stranger says softly, ‘is the point’. This is way scarier than I’m making it sound.
‘Luckily he didn’t see me, then’, Steve says sheepishly. If you ever meet Steve’s wife, ask her about this voice. I promise you’ll be entertained.
‘No he didn’t’, the stranger concedes, ‘but I did. And I’m the Taxman.’
Metaphors are much more tenacious than facts. - Paul de Man
(Paul gets why I’m telling this story)
Given Steve’s entire purpose here, it’s easy to imagine that he saw this whole encounter as some kind of metaphor. A tax official meets the Taxman… And starts thinking about taxes, right?
Back to the story:
Steve’s still thinking about the Taxman three days after that afternoon conversation in the bar. It takes yet another yell from his boss for him to get back to his GST data. (Doesn’t Steve’s life seem idyllic?)
Something changes this time he’s looking at the numbers though. Something clicks. (I’m imagining some kind of ‘A Beautiful Mind’ scene where each snippet of conversation changes the way Steve sees the numbers in front of him)
Steve realises that his conversation with the taxman is a perfect metaphor for how New Zealand’s GST works at the moment.
The crux of it is simple enough: A smart bartender (business owner) makes it easier for someone in her bar (Steve) to partake of her own stock (her drinks, her water) rather than someone’s else’s (the water that Steve brought in with him). And she can’t do that if her prices are higher than foreign ones - which they have to be, she’s paying tax on everything that she sells in her bar (her water included). She really wouldn’t need a ‘no outside drinks allowed in the bar’ sign if she could.
It gets Steve thinking. Barring a sign saying ‘No products from other countries allowed in New Zealand’, a business owner has to offer you a better deal than you can get anywhere else, if he wants to run a profitable business - competition makes the wheels of business turn. Kind of difficult, Steve thinks, when she’s competing with stores from all over the world that don’t have to pay the taxes she does!
And that’s where we were in 2015: It was easier to buy a kayak from an online store in Canada than it was to buy one from the shop down the road.
Boromir’s Ox Horn Bugle was cheaper on Amazon than it was in Middle Earth! (Lord of the Rings reference, check. WE CAN ALL MOVE ON NOW.)
Why in the world is it easier to buy something from Canada? The internet. The reason the situation was so messy. In 2015, GST laws governed businesses in New Zealand, they weren’t concerned with businesses in Bora Bora. The internet, this beautiful shared space where you could buy and sell anything from anywhere, was why they had to be.
So the question became: how to level the playing field? How to make sure our local entrepreneurs aren’t losing out to big American companies like Netflix?
The best place to put everything on the table is the beginning of the article. The second best place is here. - Me
(Wow, what a great quote, I’m saving that one for later)
It’s a good thing we segued so nicely into Netflix. The new tax is called the ‘Netflix’ Tax for a reason. What better company could I possibly use to help Steve figure out how to tie everything together. (Um, no hard feelings Netflix. We love you. Thanks for Stranger Things.)
What’s that you’re saying? More Taxman? Well, if you’re going to insist…
‘Hey Steve, I’m back.’
They’re in his home this time. Steve is wishing he isn’t wearing his yellow duckie pajamas. This is more embarrassing than that time he got caught trying to water down a cosmo.
‘Hey Mr. Taxman, Your Highness, Sir.’
‘Nice PJs, Steve’.
‘Thanks’, Steve says drily, forgetting himself for a minute.
The Taxman gives him a glare. A glare that has been honed over centuries, chiseled to contain the perfect amount of anger and disapproval.
‘Thanks, Your Highness, Sir’, Steve quickly says, correcting himself.
‘Okay Steve, you like movies? I like movies. Have you seen that Thor movie, Steve?’, the Taxman is being conversational like he actually wants to watch a movie, Steve is getting confused. ‘If I wanted to watch the Thor movie tonight, where would I go, Steve?’
‘Really? Well, I don’t have the DVD’ Come on, Steve. He doesn’t really want to watch a movie. ‘But I hear it’s on Netflix!’
‘Ah!’ exclaims the Taxman. As he exclaimed every time a mouse fell perfectly into his perfectly orchestrated mouse trap. ‘Is it cheaper?’
‘Yes, sir, Your Highness.’ Poor Steve, he still doesn’t get it.
‘Is it New Zealand’s own?’ Taxman’s voice has a bit of an edge now.
‘No, sir, Your Highness.’ Poor Steve, he’s getting it.
‘What’s New Zealand’s online movie streaming service called?’
‘I think it’s called Quickflix.’ Poor Steve, he gets it.
‘Why is Netflix cheaper than Quickflix, Steve?’ RIP Steve.
Another ‘A Beautiful Mind’ moment, if you please. Steve ties everything together. Netflix and Quickflix have to be taxed just the same if the business playing field is going to be fair.
Here’s why: 2015 sees Quickflix at an inherent disadvantage, having to hike its prices because it has to pay 15% in tax to the government. Netflix might be a US company, but it’s selling to New Zealand customers with New Zealand credit cards in New Zealand dollars.
2016 is seeing big changes to GST. The new GST laws are fairer to companies in New Zealand (who are the little guys in comparison to juggernauts like Netflix and Steam). So while they might be cause for complaints that popular streaming services are raising the price of its subscriptions or that online games are costing a little more, they are good for New Zealand’s businesses, and ultimately, for you.
Taxman saves the day. (Not a sentence you hear every day, do you?)
Finally, in conclusion, let me say just this. - Peter Sellers
I started out trying to tell you why I thought Todd McClay did the right thing (I hope you’re not fast asleep). I’m convinced he did - between Steve and the Taxman, I believe you know why these laws are essential to an even playing field.
Here’s the kicker: New Zealand is part of a small handful of countries implementing digital tax laws. Most countries, lacking digital tax laws, have businesses that are worse off for competing with cheaper, faster, online services.
We have to wait for the Taxman to catch up with them. He will.
For more on the exact changes and how they’re affecting businesses around the globe, check out part 2 here.