Tax mulled on internet purchases
Online shoppers could soon be paying GST on more internet purchases, with the Government appearing to be warming to the change.
Revenue Minister Todd McClay said he had asked officials to look at the measures other countries were taking to collect GST-type taxes, saying they appeared to be increasing the amount of tax collected.
At present, GST is not charged on imported digital products such as music, films and games that are downloaded or streamed from overseas and cloud software services that are hosted abroad.
Buying physical goods online worth less than $400 generally also escape GST because the combined value of the tax and duty payable was less than $60.
Retail NZ, the former Retailers Association, welcomed McClay’s comments. Spokesman Greg Harford said the $60 tax threshold meant New Zealand retailers could not compete with foreign websites. The association has also estimated it is costing the Government $200 million to $300m in lost revenue.
South Africa became the first country to try to charge GST on digital imports in June when it required overseas firms to register for GST on electronic services they supplied to South African customers.
Speaking at the Institute of Financial Advisers annual conference in Queenstown, McClay appeared to give a nod to domestic retailers, saying it was important GST was fair to ‘‘consumers, retailers and all taxpayers’’.
‘‘Where tax is not paid by one group it must be made up for by another,’’ he said.
Several countries had implemented policies to address ‘‘offshore purchasing’’ and digital downloads, he said. ‘‘Early indications are that these measures are having their desired effect. I have therefore instructed officials to report to me in the short term on these developments and their suitability for implementing as part of the New Zealand tax system.’’
However, McClay also said the Organisation for Economic Co-operation and Development (OECD) appeared to be making good progress developing rules that would help countries plug gaps in the collection of GST.
A spokeswoman for McClay indicated the speech did not necessarily signal the Government was shifting its emphasis away from the OECD international approach.
‘‘In terms of significance, you should read out of the speech that we remain committed to the OECD process. While actively looking at other jurisdictions’ successes, we need to be mindful their methods may, or may not suit New Zealand,’’ she said. Officials had not been given a deadline for their report, she said.
The Government set up a joint working party between Inland Revenue and Customs in 2013 to look at the tax-free threshold and had planned to release a discussion paper last year, in the run-up to the election, that would have given retailers and consumers an opportunity to have their say. But it delayed the paper until this year, citing international developments.
McClay indicated at the time that the Government believed the tax treatment of digital products and services was at least as big an issue. Their value is increasing because of technological change and the increased uptake of fast broadband.