Social influencers could be taxed for receiving free products

SOCIAL media influencers had better think twice about accepting all the free swag they are offered.

A draft statement published this week by the Inland Revenue Department suggests that in certain circumstances socalled content creators could be liable to pay tax on any free items they receive from brands.

The 47page IRD document strives to offer guidance to gamers, streamers, bloggers, influencers, artists and any other online creators on meeting their tax obligations.

Tax expert Robyn Walker, a partner at Deloitte, describes the steps being taken by the IRD as really proactive. ‘‘I haven’t seen anything similar from other revenue agencies around the example of a DIY influencer who has received tools from a manufacturer to use in a video. Those tools could be sold on, and the value of that resale attracts a tax obligation that the influencer must disclose to the IRD.

Under the rules, the content creator would need to estimate the resale value of an item received by checking its price in the online marketplace, obtaining an estimate from a secondhand store or comparing the product to a similar item being sold online.

In some circumstances, these rules could also apply to gifts and donations given with no strings attached. The IRD would consider the regularity of these ‘‘gifts’’, why they were being given and the relationship between the gift giver and the content creator.

Ms Walker said that there was quite a large grey area, which could lead to confusion applying the rules.

Take the example of an online gamer who was given a drinks fridge packed with energy drinks. During his esport streaming sessions, he was required to gulp the drinks and display the fridge in the background. Under the rules, he would have to disclose the resale value of a lightly used drinks fridge but not the energy drinks, because the empty cans will have no resale value.

Another example was a fashion blogger, who was invited to attend a ticketonly event. If the blogger’s name was on the door, or on the ticket itself, then this would have no resale value as it was only valid for the person who received it.

Ms Walker said, given the many variables, it would be important for IRD to make the rules as clear as possible, especially given that many influencers would be smaller operators.

Local influencers who received items while on an international trip with a company were not in the clear either.

The documents explained that people’s tax residency ultimately determined where they were required to pay their tax.

However, Ms Walker added that influencers needed to be aware of whether they were also paying tax in another country, because that could entitle them to claim a tax credit in New Zealand to ensure they were not doubletaxed. Esports professionals making decent money from their streaming battles would also need to sharpen up their knowledge of the New Zealand tax scene. While amateur gamers would not be liable for tax obligations on the prize money they earned from entering a competition, professional gamers making a decent living from streaming and competing would have to pay tax on their winnings. Given this was all so new, there were again likely to be grey areas.

The trend for influencers to accept free items in return for their promotional work was essentially a form of barter, which qualified as a commercial activity that had been around for as long as people had owned things.