It is thefinancial and diplomatic equivalent of herding cats into a synchronisedswimming display for a live-streaming version of YouTube.

The irony is thatsuch a display would make Google a mountain of tax-free cash from theadvertising.

Many of thesebehemoths are hoping the killjoys will throw their hands in the air and go backto their chequebooks. Those consumers should think again.

As hard as it is,Key was right to back Revenue Minister Todd McClay, who quietly told aconference of financial advisers in Queenstown last week he had asked officialsto look at the unilateral moves some governments have taken to imposeconsumption taxes on physical and virtual online sales.

South Africachanged its rules from June 1 last year to require suppliers of digitalservices to register for VAT (value-added tax) and collect the tax at the pointof payment. Initial signs are positive.

The question now is how long New Zealand and the rest of the connectedworld can wait for a negotiated and co-ordinated international solution.

The economy is evaporating into the cloud as the services sector isdragged out of its offices and shops and sucked into the world of apps.Financial services, retailing, medical services, education, accounting,advertising and television are dissolving into bits and bytes.

The Advertising Standards Authority provided figures this weekshowing $589 million was spent by New Zealand companies on online advertisinglast year, the first year it surpassed newspaper advertising ($484m). And itwas only just behind TV advertising ($614m) and is up from $15m in 2004.

TVNZ, TV3 and the newspaper companies diligently pay tax andcollect GST, but most of that online advertising is being spent with Google,Facebook and a plethora of overseas sites that don't pay tax here.

The numbers are just as big in retailing. The monthlyBNZ/Marketview survey of online retailing estimated New Zealanders are buying$1.2 billion a year of clothes, shoes, music, hardware and electronics fromoverseas sites.

It is growing at14 per cent a year, almost quadruple the growth rate of sales frombricks-and-mortar stores here.

Total onlinesales are still just under 7 per cent of total retail sales, but total onlinesales could grow $3.5b over the next decade.

A jumbo jet fullof clothes flies into Australia every week to be distributed from Asoswarehouses there to front doors throughout Australasia. No GST is paid, givenour tax-free threshold is $400 and Australia's is A$1000.

The RetailersAssociation reckons the Government is missing out on $400m a year of GST.Treasury reports GST receipts have consistently under-performed forecasts inrecent months.

This washighlighted this week when Netflix said it would offer its service here fromoverseas and would not collect or pay GST.

Spark was amongthe first to protest the unfairness of this, given its Lightbox service doescharge GST. Sky TV will be the next to object.

Key and Labourleader Andrew Little, who supported the move to charge GST on overseaspurchases online, should be congratulated.

The alternativeis higher income taxes or fewer Government services.

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