Convenience Fees and the new Internet Tax

Chances are if you have tried to use Internet banking to pay your rates, taxes, infringement notices, or anything else even slightly government related you will have noticed the following:

A x% convenience fee will be charged for using this service


A convenience fee is antonymous with how real-life economics work.

For example, consider a simple dine-in/takeaway restaurant model. The takeaways are considerably discounted over the dining-in options because takeaways are more convenient and less over-head for the business. It is less work for them – no waiters needing to attend the diner’s water supply, no nicely arranging the meal on the plate, no supplying of dishes, candles, cutlery, or table-cloths, and no clean-up required afterwards.

However, only in governmental organisations would something that reduces their administrative overhead actually cost the end-user more.

The ability to pay online means no more time wasted with bounced cheques and paper-work. It means no more keeping the money in various holding trusts before it is transferred to the destination account requiring a sign off process and inevitable fee along each step of the way.

And then there is the considerable time saved by Joe Blogs trying to making the payment.

But instead, in order to avoid the convenience fee, this involves Joe going to the approved (usually Westpac) bank to make the payment. Of course the cashier is unable to accept EFTPOS, and can only take cash or cheque. So now, (because he hasn’t used a cheque in five years) a frustrated Joe Bloggs has to retreat 15 steps and go to the bank’s own ATM, extract the money, and then hand it back to the same cashier, incurring a number of fees along the way. Joe is now grumpy, and has just wasted his lunch hour when he could instead have been doing much more exciting things with his Jo.

This process is not very productive for anyone. Yet change-aversive bureaucratic dinosaurs are doing their best to deter a much more clean and efficient solution.

And then to add further salt to the wound the convenience fee is calculated as a percentage of the sum paid. What possible justification is there for this?

Not even banks charge us transaction fees based on the percentage of our purchase. An electronic payment of $300.00, does not incur any more processing costs than a payment of $3.00, in the same way that our hard drives do not get heavier when we fill them with photos.

A convenience fee is little more than a thinly disguised tax. It is a new revenue source, an Internet tax – the cyber version of GST.

What I would like to know is, currently who is the recipient of this new tax money? The bank? The IT department? The council? The government? Is it treated as extra revenue and taxed accordingly?

Is this even legal?

And if I sell a wardrobe on Trademe can I also charge a 3% convenience fee when the successful bidder comes to pick it up instead of me posting it?

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One Response to Convenience Fees and the new Internet Tax

  1. David says:

    I agree. It is convenient to them they should pay.

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