Itanz in cleft stick over GST proposals

More than a week after Inland Revenue (IR) mooted proposed changes to GST affecting software development and purchase from overseas, the IT Association of New Zealand (Itanz) has not prepared a response to the matter.

More than a week after Inland Revenue (IR) mooted proposed changes to GST affecting software development and purchase from overseas, the IT Association of New Zealand (Itanz) has not prepared a response to the matter.

Itanz chief executive Jim O’Neill says the association finds itself with conflicting interests.

“We have both local and overseas organisations among our membership. Some of the overseas ones may find it troublesome, but to the local firms it looks good. So we have to be careful of the stance Itanz takes,” he says.

The main feature of the proposal is to treat IT development done overseas and software imported for businesses as services liable for GST – purchasers actually paying IR a “reverse charge” of the same amount. This will inflate the cost of these imported services – particularly for financial service companies, which cannot charge GST on the services they offer (see GST proposals benefit local software firms). Local software producers, who have always had to charge GST, will be on a more even footing with their overseas competitors.

But the proposal is complex, O’Neill says, “and there’s a lot in it we’re still trying to understand.”

The move must be seen against the background of attempts to harmonise GST, between Australia (where it was only recently introduced) and New Zealand, and across the European Community, he says.

And the question of IR in New Zealand may be under consideration only as part of “a much bigger problem” with the philosophy of the internet as a “free mechanism of trade” which has evolved in the internet-using community, O'Neill says. This encompasses both freedom of tax and tariffs and in a broader sense the enjoyment of liberty from other national laws and regulations.

A spokeswoman for the Bankers’ Association says the association and its member banks had yet to discuss the proposals formally – the first step towards making a submission.

Interested parties have until the end of August to make such submissions.

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