Rethink on online shopping
Change of tack on GST to avoid price increases
The Government has tweaked its plans to collect GST on online shopping to avoid Kiwis paying more for products, accounting firm EY says.
From October next year imports between $400 and $1000 will become slightly cheaper as customs duty and levies will no longer be applied to goods valued under $1000.
The Government’s GST collection laws announced earlier in the year may have seen the cost of goods increase slightly when duty, levies and GST were added.
Revenue Minister Stuart Nash confirmed that new rules would be aimed at imported goods valued at or below $1000. Customs would retain responsibility for collecting GST on imported parcels valued above that.
“There are about 26,000 small businesses in New Zealand employing more than 62,000 people in the retail sector. Many are in competition with foreign firms who sell exactly the same product into our market without collecting GST,” Nash said. “We intend to make offshore suppliers collect GST on low-value goods at the moment of sale, and in turn, buyers of these goods will no longer pay Customs tariffs or border security and biosecurity fees. This will simplify compliance and administration costs at the border,” Nash said.
According to accounting firm EY, Kiwis will now only be required to pay GST of 15 per cent on low-value goods bought online. Retailers and online websites will be required to collect this from consumers when each purchase is made, EY said.
EY tax partner Paul Smith said the Government had been savvy to notice and change the rules to avoid backlash.
“Consumers of imported goods below $400 will face a slight increase due to the addition of GST to all imports. Under current rules, these goods can be imported GST-free,” Smith said. “The Government is banking on overseas suppliers to comply to raise revenue under these rules. If they don’t comply, it could be a disaster from a revenue collection perspective.”
From October 2019, foreign companies will be required to collect GST if their total sales to Kiwi consumers exceed $60,000 per annum, similarly to the way companies are registered and required to collect GST on digital services such as Netflix and Spotify.
Retail NZ said it welcome confirmation from the Government that foreign websites selling into New Zealand will have to register for GST.