Sharechat Logo

Govt raises GST threshold for online shopping

Thursday 18th October 2018

Text too small?

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)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ stocks fall on renewed Brexit uncertainty, dividend payouts
NZ dollar heads for 1.3% weekly gain as investors wind back expectations of further weakness
NZSA pans Kathmandu's lack of disclosure on directors' fee increase
Refining NZ eyes low-carbon opportunities
Mercury storage slides to two-year low
NZSA says time's up for Keith Smith on Warehouse board
October manufacturing activity strongest since May
Blis Technologies narrows 1H loss, upbeat about FY19
Foley Family Wines migrates to NZX's main board
Craigs becomes NZX Wealth Technologies' first customer

IRG See IRG research reports