How the Amazon tax works
Consumers will have to pay GST on most small items they buy from overseas websites from October next year, under a government proposal. The Government will ask large foreign firms to levy GST on low-value items they ship to Kiwis. The change will be costly for consumers and will make buying from local retailers more attractive.
If you buy an item costing less than $400 (including shipping) from a major overseas retailer – for example from an overseas website – the seller should add 15 per cent GST to the cost of your order. So, broadly speaking, most items costing less than $400 will cost 15 per cent more to buy online from overseas than they do today. You should already be paying GST, so no change. The foreign seller won’t charge GST, but you will remain responsible for paying GST yourself, plus any import duty and a $49.24 Customs and biosecurity fee. Customs may hold up your delivery until you pay. Foreign firms that sell less than $60,000 of goods or services to New Zealanders each year (ie. companies that would not have to register for GST if they were a New Zealand business) won’t have to charge you GST and if you buy goods from them costing less than $400 you won’t have to pay it either. Online marketplaces will be treated like large foreign sellers, even if they are just the ‘‘middleman’’. So the operators of such sites will be responsible for adding GST to your bill, even if the final seller is actually a small trader.
Yes. But not many. The current rule is a little more complicated than goods under $400 being tax-free. The actual rule is that if goods would attract more than $60 in GST and import duty then GST and duty is payable, plus a $49.24 biosecurity fee.
Some items likes shoes, clothes and jewellery still attract duty at a rate either 5 or 10 per cent, and so the current rule means that consumers can be responsible for paying GST, duty and the $49.24 fee on items costing as little as $226.
To make the new rules simpler for foreign firms and consumers, the Government is proposing to get rid of import duties and the Customs and biosecurity fees on all items costing less than $400.
Melissa buys a pair of running shoes costing $300 from an overseas website. As shoes attract 10 per cent duty, she would currently have to pay $428.74 including GST, duty and the Customs and biosecurity fees if the delivery was intercepted by Customs. Under the new proposed Amazon tax, GST would be levied by the seller, but there would be no duty or other fees, so the cost would be $345. Yes. If Melissa bought a book costing $50 from Amazon today that is all she would pay. Under the new rule she would pay $57.50, because Amazon would have to add GST.
No-one really knows for sure. Australia will become the first country to levy an Amazon tax on low-value imports in July, so we may find out what the likely level of compliance will be then.
Australia’s tax department has indicated it has a number of tricks up its sleeve to make foreign firms comply. For example, if they don’t play ball the Australian government could grab any payments from Australian firms that owe the foreign company money – or try taking them through the courts in their home country.
Local retailers argue they can’t compete against foreign firms that have a 15 per cent tax advantage. The growth in online shopping means the Government is losing more revenue as a result of GST-free internet shopping. Revenue Minister Stuart Nash forecasts the Amazon tax will raise about $90 million a year, but most tax experts think the real sum is likely to be at least $200m.