The secret plan to bring in an ‘Amazon tax’ for online shopping A TAXING PROBLEM
Consumers might pay more but retailers would cheer if Labour closes the loophole on internet shopping, writes Tom PullarStrecker. Your say: Are you ready for
THE Government has lifted the lid on a secret proposal by the former National government to impose an ‘‘Amazon tax’’ on internet shopping from October 2019.
National’s proposal could yet be revived by the Labour-NZ First government which has also expressed a willingness in principle to close the so-called GST ‘‘loophole’’ on internet shopping.
A Cabinet paper drafted by the National government in July and released by Revenue Minister Stuart Nash under the Official Information Act suggested foreign firms should become responsible for levying GST on items worth less than $1000 that they sold to New Zealanders.
But to make the change easier to administer and more palatable to consumers and foreign firms, import duties and a $49.24 Customs and biosecurity fee which can apply on imports costing between $226 and $1000 would be abolished.
Retail NZ has lobbied for an Amazon tax, arguing it would put overseas internet firms on a levelplaying field with local shops. Policy manager Greg Harford said National’s proposal would be ‘‘a huge step forward’’.
But he said October 2019 ‘‘seems an extraordinarily long time away’’ and he hoped a law change could instead be implemented this year.
The Cabinet paper – which proposed releasing a public discussion document on the GST changes – was not signed off by the National government, and was instead put on ice less than two months before the September election.
Former revenue minister Judith Collins said that was because some details remained to be worked out concerning the impact on Customs’ funding and because minister had felt it was too close to the election to release a discussion document.
Collins said the ‘‘smartest thing’’ the new ● FOREIGN firms that sell more than $60,000 of goods to Kiwis each year would need to levy GST on items worth $1000 or less. ● No import duties or Customs/ biosecurity fees would be payable on those items. ● If someone buys an item worth more than $1000 overseas, they remain responsible for paying GST, any duties and a Customs/ biosecurity fee, themselves. ● New rules could come in on October 1, 2019, and be ‘‘consistent’’ with Australia’s Amazon tax, due this July. ● If someone bought a T-shirt costing $50 from overseas they could expect to pay $57.50 – $7.50 more than today – because of the addition of GST. ● If they bought a pair of shoes costing $300, they would pay a total of $345 for their purchase. Government could do would be to continue with the approach set out in the Cabinet paper, noting Labour had pushed ahead with multinational tax law changes originally drawn up by the last government.
There was no need for the Government to ‘‘reinvent the wheel’’ on an Amazon tax when the former government had done ‘‘quite a lot of work across three major departments’’, Customs, Inland Revenue and the Treasury, she said.
Nash said that would be a matter for the Tax Working Group to consider.
The Government has asked the working group to look at the Amazon tax issue and Nash has said that it could implement any recommendations it made on closing the GST loophole in advance of the next election.
PwC tax partner Eugen Trombitas said National’s proposal reflected approaches being taken in Europe. ‘‘I would have thought the current Government had nothing to lose by picking up this piece of work and polishing it.’’ But he believed October next year might now be the
earliest realistic date for a How it works now Items that would attract less than $60 in GST and import duty can be bought from overseas tax-free.
NZ has abolished most duties, so most items less than $400 (including shipping) can be bought online from overseas untaxed.
But some popular items still attract import duties. The tax-free threshold for shoes and clothes, for example, is $226, because they attract duty at the rate of 10 per cent.
Purchases above the tax-free threshold caught by Customs, require GST, duty and a combined Customs and biosecurity fee of $49.24 so a $300 pair of shoes should cost $428.74 including GST, 10 per cent duty and the Customs and biosecurity fees. law change, given the involvement of the Tax Working Group and a legal requirement for all stakeholders to be consulted.
National’s Cabinet paper said its plan would create a more level playing field for New Zealand and foreign firms and ‘‘reflect the modern world of consumer purchases’’.
It ‘‘conservatively’’ estimated its version of an Amazon tax would raise $64 million in its first full year of operation in 2020-21, rising to $81m two years later as internet shopping grew.
That was based on an assumption that three-quarters of foreign firms would fall into line and agree to levy the tax for the Government. Consumers would have paid more in tax overall.
But the change would have meant the Government foregoing $5.2m a year in tariffs on lowvalue goods and $17m a year in Customs and biosecurity fees. In the end, that would have left government coffers about $42m a year better-off.
Trombitas said abolishing duty on low-value imports was probably pragmatic. ‘‘The big plus is, you simplify GST at the border.’’ WELLINGTON mum Mary-Rose Painter, 31, shops regularly online.
‘‘Particularly with an 18-month old I have very little time for wandering up and down the shops.’’
She has been ‘‘pinged’’ by Customs after crossing through the tax and duty threshold, when buying dresses online that cost $300.
‘‘Customs are pretty good about it, they released the goods quickly. But I would have got charged about half of that again in fees to bring it in – it is a bit cheeky.’’
Painter believes making overseas firms levy GST on small purchases while doing away with duties and Customs fees on goods worth less than $1000 would be a good solution to the GST issue, and might even mean she shopped more online.
‘‘What I tend to do now when I am buying stuff is make sure I come in below the threshold.’’
Fellow Wellingtonian Roslyn Marlow, 29, says that five years ago, she would have strongly objected to having to pay GST on
The ‘smartest thing’ the new Government could do would be to continue with the approach set out in the Cabinet paper.’ JUDITH COLLINS
small overseas online purchases.
‘‘I would have said ‘that is ridiculous, you can’t do that’.