Retailers ‘scream blue murder’ on tax
The Government could be missing out on at least $140 million a year as tax laws continue to lag online shopping trends, a GST expert says.
Deloitte partner Allan Bullot said New Zealand’s clothing, cosmetic, toy and book stores were ‘‘screaming blue murder’’ at online giants overseas nabbing their customers with cheaper prices.
It was a hot political topic and shoppers should expect their online purchases of low-cost goods to be taxed soon after this year’s election, he said.
Bullot said the law had not kept up with shoppers’ shift towards buying online. The Goods and Services Tax Act and Customs regulations still let online purchases of items that do not attract duty tax enter New Zealand and arrive on doorsteps with no added 15 per cent GST, he said.
Most items do not attract duty tax and are only subject to GST if their value is more than $400.
In most cases clothing and footwear attracts a 10 per cent Customs duty tax payable by the consumer at the border, unless that combined GST and duty payment falls below a threshold of $60.
Bullot said the Government had been talking about GST law reform for years.
A 2015 Government discussion document, titled GST: Cross-border Services, Intangibles and Goods, stated that Kiwis’ volume of online purchases was making GST collection unfair and inefficient.
In October last year an online services tax was introduced, forcing offshore digital service providers to pay the same GST as New Zealand-based competitors, bumping up prices on the likes of Netflix.
Bullot said it had proved successful, with the majority of international digital firms registering with New Zealand’s Inland Revenue Department to comply with the new rule.
Comparing a renewed goods tax law to a ripped fishing net, Bullot said the Government needed to throw something into online retailers’ water to catch at least some of the money slipping through the system.
New Zealand-based online clothing retailer Last Season had revenue growth of more than 308 per cent from 2014 to 2015. Its director, Jeremy Mould, said his company could have seen more success if there was a goods tax on all online clothing purchases coming into the country.
He said a lack of GST on cheap goods kept his company at a disadvantage to global players such as the United Kingdom’s Asos and Australia’s The Iconic and SurfStitch.
Mould said his company had to pay GST on the clothing it imported and sold online to New Zealanders, so offshore retailers should too.
‘‘It does feel to me that people are shortcutting and bypassing [taxes].’’
He said shoppers buying clothes online for a better deal were fostering a false sense of savings because the process to return items was more difficult if the retailer was based overseas.
A New Zealand Customs spokesperson said it was working with Inland Revenue, the Ministry for Primary Industries and the Treasury to ‘‘explore a range of alternative, low-cost methods of collecting duty on low-value goods’’.
Bullot said rolling out taxing of cheap imports would be easier said than done.
It would be most effective if the extra cost was put on the price of goods by the online retailer so it would be paid by the consumer at the point of sale, he said.
❚ Is your business growth on speed dial, despite the missions you’ve faced so far? Entries for this year’s Deloitte Fast 50 index are open until July 28. Visit deloitteprivate.co.nz/fast50.