Cash no longer king?

Published in Insights, The New Zealand Initiative’s newsletter, 19 July 2013

A few weeks ago, I spoke at a breakfast event opened by Maurice Williamson, Minister for customs, Statistics, Land Information and Building and Construction.

I wish I had taken the Minister’s remarks more seriously, as I would have been less surprised by the government’s announcement last week: the government is considering options to make credit card companies and online payment services like PayPal collect taxes on online shopping imports.

This may only be the beginning.

Mr Williamson mused that within a decade, coin and paper money would be history and electronic forms of payment would have taken over. That, he said, would make it possible to finally collect GST on all imports. Currently, a minimum threshold of $400 applies as it is simply too costly to collect taxes on imported goods.

There may be good reasons to collect GST on everything that enters the country – the most powerful argument is that it would level the playing field for domestic retailers (although even with GST added, many imported goods would still be much cheaper).

On the other hand, there are at least as many reasons to be sceptical about the government’s ideas. Credit card providers have already stated that they are not set up to deal with GST collection. There will also be ways of avoiding tax by resorting to different payment forms. Never underestimate the creativity of tax avoidance.

My biggest concern, however, is philosophical and relates to Mr Williamson’s thoughts about the end of cash. He is right that the bulk of our transactions are already conducted electronically. Not just big ticket items like buying a car, paying off your mortgage, or settling monthly bills. Even buying a flat white now increasingly happens through EFTPOS.

And yet, it is nice to know that there is a more anonymous alternative – one that government cannot track. If cash were to be abolished, government could theoretically keep a record of everything we do as we leave electronic traces with every transaction.

To be fair to Mr Williamson, that is certainly not what he had in mind. But recent news about government agencies’ regular surveillance activities makes you appreciate the areas in which our lives cannot be monitored.

Cash may no longer be king, but it is a little piece of freedom we carry in our wallets.

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