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New Zealand Consults On Imposing GST On Low-Value Imports

by Mary Swire,, Hong Kong

03 May 2018

New Zealand has launched a consultation on proposals to charge goods and services tax on consignments worth less than NZD400, which currently benefit from a tax exemption for low-value imports, from October 1, 2019.

Presently goods worth no more than either NZD226 (USD158) or NZD400 (depending on if they are subject to duty) are not subject to goods and services tax on import. In essence, the tax authority waives liability to GST if the amount of tax at stake is not more than NZD60.

The proposed change is in line with the recommendation of the OECD in its Action 1 base erosion and profit shifting report and resulting VAT/GST Guidelines, that countries should do away with exemptions for low-value consignments. Australia is likewise removing its exemption.

Launching the consultation, Revenue and Small Business Minister Stuart Nash said: "Domestic businesses have long called for greater fairness in the treatment of low-value goods from offshore retailers. Foreign companies are not required to collect GST on goods under NZD400. We are now calling for feedback on a system to register these suppliers for GST. There are more than 26,000 small businesses employing more than 62,000 people in the retail sector. Many are in competition with foreign firms who enjoy this tax break. Local firms compete on an uneven playing field. Large multinationals sell exactly the same product into our market without collecting GST."

"GST has always been payable on low-value goods but it is not cost effective for Customs to collect it when it is NZD60 or less," added Customs Minister Meka Whaitiri. "We propose making 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. This supports the focus of Customs to make cross-border transactions easier without compromising the need to keep out illicit substances and materials."

"GST has been collected on services and digital products from offshore, such as streamed movies and music, since 2016. This extends that to goods," explained Nash.

Kirk Hope, the Chief Executive of BusinessNZ welcomed the move, saying there would benefits for consumers as well. "It would not mean extra compliance for New Zealand customers, and it would provide some certainty around pricing of imported goods." He warned, however, that the system will take time to develop, with more work needed on policing of overseas providers and their reporting systems for tax collection, he suggested.

"We have treaty arrangements with other countries that would allow us to request them to collect unpaid GST on New Zealand's behalf, and we need to develop joint registration and collection systems with those countries," he noted. "Once the system [is] fully developed, we [will] achieve a GST system that [is] comprehensive in New Zealand and aligned with other sales tax systems internationally."

TAGS: compliance | tax | small business | business | value added tax (VAT) | sales tax | VAT cross-border transactions | tariffs | Australia | fees | tax authority | offshore | multinationals | New Zealand | retail | services | VAT compliance matters | BEPS

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