A taxing problem

The secret plan to bring in an ‘Amazon tax’ Consumers might pay more but retailers would cheer if the new Government closes the loophole on internet shopping, writes Tom Pullar-Strecker.

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 socalled 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 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 drew on work done by the OECD and 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 law change, given the involvement of the Tax Working Group and a legal

The ‘‘smartest thing’’ the new Government could do would be to continue with the approach set out in the Cabinet paper. Judith Collins Former revenue minister