The Optimal Threshold for GST on Imported Goods

John Creedy

No 16/01, Treasury Working Paper Series from New Zealand Treasury

Abstract: This paper examines the determination of the optimal threshold value for Goods and Services Tax (GST) for imported units arising from internet orders. The concept of an optimal threshold is wider than simply the maximisation of revenue net of administrative costs. At the optimal threshold, the marginal cost of funds from GST is equated to the ratio of the marginal value of public funds to their marginal social value, reflecting the value judgements of a decision maker. The marginal cost of funds allows both for compliance costs and the marginal excess burden arising from a small increase in the threshold. Illustrative numerical values are reported, showing the sensitivity to administrative costs, the demand elasticity and, importantly, value judgements.

Keywords: Goods and Services Tax; Marginal cost of Funds; de minimis (search for similar items in EconPapers)
JEL-codes: H20 H21 (search for similar items in EconPapers)
Pages: 26
Date: 2016-03
New Economics Papers: this item is included in nep-pbe
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https://treasury.govt.nz/sites/default/files/2016-03/twp16-01.pdf (application/pdf)

Related works:
Journal Article: The Optimal Threshold for GST on Imported Goods (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:nzt:nztwps:16/01

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