HomeOPINIONDuty-free sales are a taxing issue

Duty-free sales are a taxing issue

One of the differences between Australia and New Zealand is that on this side of the Tasman is that there’s no GST refund scheme for tourists, and that items sold tax or duty free to international travellers can’t be carried out of the store by the customer. Instead, retailers that want to offer tax and duty free sales have to enter into private arrangements with airports and seaports that provide collections points for customers. The goods need to be sent by courier to the port of departure, and collected airside.

Airports used to provide this service to a wide range of retailers, but as they have adopted a more commercial approach over recent years, we have seen them hike up the prices to a level where it’s uneconomic for many retailers to use the service.

Many New Zealand retailers are aghast at reports that Christchurch International Airport Limited is hiking up the fees it charges for using its duty and tax free collection point. The fees are currently high – at a maximum of $225 per parcel – but from 1 May, for most items, the airport will be charging 10 per cent of the value of the item, up to a maximum of $500 plus GST.

That’s a whopping 93 per cent increase on the current maximum charge, which in itself already seems astonishingly high.

The big question is why the airport levies the charge based on the value of the item, when we think the airport’s cost of handling an item will be the same, irrespective of value of an individual item.  While a larger item will take up more space on a shelf, it is hard to see how the handling costs for an identically-sized ring can vary by up to $480 depending on its value.

While these fees seem pretty outrageous, the real issue is the archaic tax system that puts airport companies in a monopoly position where they can charge these fees.  GST is supposed to be a tax on consumption in New Zealand – not on goods purchased in New Zealand but exported to be consumed offshore.

Other countries with VAT or GST systems recognise that tax should not be paid on goods taken out of the country by tourists; and have refund schemes that allow the travelling customer to claim the VAT or GST back.  There’s usually an administration fee charged, but the customer is able to make purchases knowing that he or she can get most of the tax back.  It’s pretty simple, and works well; although admittedly only to reclaim GST, not any duty that might apply.

We’ll be looking further into all of this over the next few months, and raising awareness of the issue with Government.

We’re really keen to hear what jewellers and others think about it.

How much value does being able to sell ‘tax and duty free goods’ to travelling customers really add?  How much would your business benefit if there was a GST refund scheme in place in New Zealand?  And, if you’re in Australia, how does the Tourist Refund Scheme help your business?

Please let me know by email at advocacy@retail.kiwi.

Rate This Article: