The Government has released a discussion document on the collection of GST for online purchases, unveiled by Revenue Minister, Todd McClay.
GST: Cross-border services, intangibles and goods contains proposals to require overseas suppliers to register and return GST when they sell services (including online products such as e-books, music and videos) to New Zealand consumers.
According to McClay, it also outlines the way forward for potentially improving the collection of GST on all goods, including low-value imported goods.
“This document is an important first step in dealing with the increasing volume of purchases that should, under New Zealand’s tax rules, be subject to GST,” McClay says.
“It is about creating a level playing field for collecting GST and putting New Zealand businesses and jobs ahead of the interests of overseas retailers, but it must be done with the least possible inconvenience to New Zealand consumers.”
McClay says the volume of services, online downloads and goods purchased by New Zealanders from overseas suppliers on which no GST is paid is an “increasing concern” for the Government.
“Current estimates put the amount of GST foregone on these purchases at approximately $180 million a year, and growing at around 10 per cent each year,” he adds.
“That is revenue that would otherwise be available to the Government to help fund essential services like healthcare, education and safer communities in New Zealand.
“It is not just about the loss of revenue on these purchases, it is also about fairness. We recognise that New Zealand suppliers, including retailers, must charge GST on goods and services they supply to their customers, whereas offshore suppliers currently do not.”
McClay says proposals released for public feedback would cover a wide range of services purchased by New Zealand residents from overseas suppliers.
They include both digital services such as internet downloads and online services, as well as more traditional services such as legal and accounting services supplied remotely.
“The proposals are a pragmatic response to a growing worldwide phenomenon, and broadly aligned with similar rules announced by Australia earlier this year, and with the current rules in the European Union,” he adds.
“They are also consistent with draft OECD guidelines due to be finalised and released later this year as part of the OECD’s wider recommendations around the problem of base erosion and profit shifting.”
McClay says that while the discussion document primarily focuses on services, the fact that GST is not charged on low-value imported goods, below the Customs de minimis, is also “of concern” for the Government.
The growing volume of imported goods means the amount of forgone GST is continuing to increase and raises concerns for domestic suppliers.
“For that reason, the consultation document raises the matter for discussion,” McClay adds.
“Customs is currently reviewing how the collection of GST on imported goods can be improved and is due to report to Ministers on the findings by October.
"This is expected to be followed by a consultation process on the issue of de minimis.”
McClay says that the document discusses some of the options and asks for feedback - this separate consultation paper on the de minimis threshold will be released in the near future and submissions will be able to be made as part of that process.
The discussion document, GST: Cross-border services, intangibles and goods is available at www.taxpolicy.ird.govt.nz - submissions close on 25 September 2015.