Govt raises GST threshold for online shopping

Thursday 18th October 2018

Revenue Minister Stuart Nash will introduce legislation next month to impose a goods and services tax on small online retail purchases.

The government signalled the plan to extend GST to online purchases from October next year, but today lifted the value threshold at which sales are captured to $1,000 from the $400 initially announced. The new regime will also require overseas retailers to register and collect GST if total sales to New Zealand consumers exceeds $60,000 a year.

Nash said the steady growth in online shopping from overseas suppliers meant a significant amount of tax revenue was being lost. GST contributed about 26 percent of the total tax take in the past four financial years, while customs duty on goods other than petrol, tobacco and alcohol amounted to about 0.2 percent.

The wider net is expected to add $66 million to the Crown coffers in the 2019/20 financial year, rising to $100 million the following year and $112 million in 2021/22. The 2018 budget forecasts project a GST take of $23.01 billion, $24.1 billion and $25.23 billion in each of those years.

"It’s a matter of fairness so the sooner we get this in place the better," Nash said. "This measure aims to help level the playing field and improve the integrity of our tax system."

The government's Tax Working Group made an early recommendation for the Crown to impose GST on low-value online purchases by introducing an offshore supplier registration model. The government is also open to alternatives when new technology allows.

Papers accompanying the release show the higher threshold was preferred to make it easier for suppliers to comply and to reduce the risk of double taxation.

The new rules are similar to the regime Australia introduced in July. The European Union has also committed to pursuing the same approach

EY tax partner Paul Smith said the higher threshold was a savvy move by the government to avoid a consumer backlash, but does rely on overseas suppliers complying with the rules.

"If they don’t comply, it could be a disaster from a revenue collection perspective," he said.

Local retailers have complained for some time about the uneven playing field, which has forced many firms out of business and others to shrink their physical store network to better compete with their cheaper rivals.

Industry group Retail NZ has been campaigning on this issue for several years. Public affairs general manager Greg Harford welcomed the confirmation of the new rules.

"While the solution is not perfect, it is a substantive step forward towards delivering a level playing field for New Zealand businesses," he said.

(BusinessDesk)

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