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HomeNEWSThe 2015 Budget is out, and there’s no online GST tax

The 2015 Budget is out, and there’s no online GST tax

Retail NZ has slammed the government for its failure to act on the hot issue of GST on low-value imports.

The organisation’s general manager public affairs Greg Harford described today’s Budget as “deeply disappointing for retailers”. He juxtaposed the new border taxes introduced to cover the increasing cost of international passenger clearance with the absence of a tax covering GST on small imports.

“The government is moving to introduce new taxes at the border but is ignoring an existing loophole that is costing the country between $200-$500 million in lost tax revenue at the border,” Harford says.

He reiterated that the current tax structure meant foreign firms selling to New Zealanders did not have to shoulder the same taxes and duties Kiwi ones did, giving overseas retailers a financial advantage.

Harford said this issue could have been resolved “reasonably simply” in the Budget. Retail NZ and Booksellers NZ will continue to run their #eFairnessNZ campaign calling for the government to require foreign websites to register for New Zealand GST.

Accounting firm PwC chose to look on the bright side, interpreting the Budget as a sign that New Zealand is soon to follow Australia’s lead in taxing services purchased online from offshore sellers. Low-value goods purchased online will also be looked at.

“New Zealand can’t ignore this issue any longer so it’s encouraging to see Budget 2015 confirms this is a key focus area on the tax policy work programme – the digital economy has a profound impact on GST,”  PwC partner and GST specialist Eugen Trombitas says.

“Making up around 30 percent of the Government’s tax take, GST is a tax on consumption and when this consumption is taking place in New Zealand, GST should be charged. New Zealand retailers and businesses have been insisting on a level playing field and there’s a danger we could fall behind the international pace and best practice if nothing is done soon.  

“Another key consideration is there needs to be a specific solution for goods and another specific solution for services,” says Mr Trombitas.

Retail consultant Warren Head says the absence of a GST fix was disappointing, but said retailers should wait and see how the ‘click and collect’ model worked out before giving up.

He pointed out that the new Budget spend on ultra-fast broadband connectivity will hit $2 billion, so smaller towns will soon see greater connectivity: “If local firms go online, the locals will notice.”

Head says local councils currently going through consultation on their long-term plans should be urgently asked to match the localized UFB rollouts with wifi platforms to drive tourists into stores – where they will pay GST on their purchases.

The Budget’s cuts in ACC are good news for retailers, Head says, saying the savings from such cuts will flow into increased consumption. Ultimately, he felt the Budget was positive.

“What I look for are the medium term trends because retailers who of necessity commence their inventory buying seasons ahead are best assisted by an absence of economic shocks.

“New Zealand retailers have had to adjust to a global crash, earthquakes, massive migration, a soaring dollar and the increasing disruption of online. So it was good to see consumption is forecast to grow by 3.9 percent in the March 2016 year (which will stick 2.3 percentage points onto GDP growth).”

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