The de minimis loophole which means offshore retailers have avoided paying GST on goods under $400 purchased online will “absolutely” be closed, Revenue Minister Stuart Nash has said.
In an interview with Newstalk ZB, Nash said the National-led Government had not gone far enough when it introduced the “Netflix tax” to gather GST on services and electronic purchases. He acknowledged that the lack of a blanket GST tax gave foreign retailers selling into New Zealand an unfair advantage.
“It gives a 15 per cent competitive advantage to [retailers] overseas,” Nash told Newstalk ZB. “While our retailers had to deal with GST, overseas people didn't. It's the right thing to do."
Nash did not provide any detail on how or when the changes he discussed would be put into place. Finance Minister Grant Robertson later backpedalled on Nash's announcement, telling the NZ Herald that closing the loophole was part of Labour's policy but the Government was still working out how to implement such changes.
He said the Government was only looking at the issue and no decisions had been made.
"I think what the Minister of Revenue was saying was that there's still quite a lot of work to do on it. This is clearly an area where there is an element of unfairness in our tax system and we want to investigate that," Robertson told the NZ Herald.
Retail NZ has been advocating for these changes for years under its #eFairnessNZ campaign. Its general manager for public affairs, Greg Harford, welcomed Nash’s comments.
"For many years, New Zealand retailers have been disadvantaged by the fact that they have to pay tax in New Zealand while foreign websites don't, even though they compete in the New Zealand market. This is the first time that a Revenue Minister has committed to fixing this issue, and we want to congratulate Mr Nash on his leadership,” Harford says.
"While the timeline has yet to be finalised, we are really pleased that Minister Nash is taking the issue seriously, and we urge him to implement a GST registration requirement from 1 July 2018, in line with the Australian Government.
The Australian Government has legislated to require foreign websites – including those from New Zealand - to register for Australian GST from 1 July 2018.
"GST is a key component of Government revenue streams, and a GST registration requirement will net the Government around $5.8 billion over the next 10 years,” Harford says. “Closing the current tax loophole will also mean that New Zealand businesses are no longer disadvantaged by Government tax policy.”
Harford says the issue of GST on purchases from foreign ecommerce retailers is becoming more pressing as online shopping grows in popularity, and as Amazon prepares to launch in Australia. It’s “just not right” that Kiwi businesses supporting the New Zealand economy and keeping communities vibrant are taxed while overseas corporations are now, he says.