Taranaki Daily News

Online GST added to shopping cart

- Tom Pullar-Strecker tom.pullar-strecker@stuff.co.nz

GST will be applied to internet shopping purchases from overseas from October next year, the Government has confirmed.

Announcing details of the new regime, Revenue Minister Stuart Nash said large foreign companies would be required to levy GST on all goods they shipped to New Zealanders valued at $1000 or less.

Nash said the move was conservati­vely expected to raise $112 million annually within three years, on the assumption that by then about threequart­ers of goods people bought online would be from suppliers that complied.

The new rules will change the situation under which most goods valued at less than $400 including shipping can be bought from overseas websites free of tax. Lower tax-free thresholds currently apply to goods that attract duty.

Customs will remain responsibl­e for collecting GST and duty on goods worth more than $1000, from consumers.

Only foreign companies that sell less than $60,000 worth of goods to New Zealanders over a 12-month period will be exempted from having to comply with the new regime, and GST won’t be payable on items bought from them.

Nash said that was in keeping with the fact that local firms with an annual turnover of less than $60,000 also don’t have to charge GST.

Australia became the first country to require foreign firms to collect GST on physical items they shipped direct to consumers from overseas in July.

The New Zealand Government’s decision to follow suit follows pressure from Kiwi retailers.

Nash said he did not believe the tax change would have a major impact on Kiwi shoppers ‘‘but it is about understand­ing the reality of the 21st-century marketplac­e’’.

There were about 26,000 small retail businesses in New Zealand employing more than 62,000 people, he said.

There is a small silver lining for consumers, with duty and biosecurit­y fees on imports worth between about $225 and $1000 being abolished.

That will make some imports valued at up to $1000 that still attract duty, such as clothes and shoes, up to about $150 cheaper. Nash said it would also remove hassles for people who might previously have had to go to the trouble of getting items worth less than $1000 released by Customs.

The new regime will also apply to online marketplac­es. Nash said Trade Me would have to comply by levying GST on items sold to New Zealanders by overseas traders via its platform.

‘‘The concern if you didn’t register Trade Me is that overseas suppliers would end up just putting their stuff up on Trade Me. The tax system has to be about fairness and integrity.’’

Nash said it would always be difficult to get to ‘‘100 per cent compliance’’ by overseas firms, but the Inland Revenue Department did have ‘‘ways and mean to enforce this’’.

If a ‘‘softly-softly consultati­on process’’ didn’t work, the tax department would take more steps, he said.

Retail NZ spokesman Greg Harford said New Zealand retailers would still have to pay duty on many items that shoppers could avoid by buying direct from overseas.

‘‘The Government’s proposal does not deal with this issue. However, it is a significan­t step forward, which will be welcomed by the New Zealand retail and wholesale sector,’’ he said.

Deloitte tax expert Allan Bullot said the big change from an earlier proposal was that foreign sellers would be required to collect GST on goods valued between $400 and $1000 – not just those costing less than $400.

EY tax expert Paul Smith said it was a ‘‘savvy change’’ that could help the Government avoid a consumer backlash, but believed there was some risk it might backfire.

‘‘The Government is banking on overseas suppliers to comply to raise revenue under these new rules. If they don’t comply, it could be a disaster from a revenue collection perspectiv­e.’’

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