Legislation has been introduced to Parliament for a ‘Netflix’ tax. This has been expected, as Revenue Minister Todd McClay released a discussion paper on the matter in August.
The digital goods tax would apply to digital services and intangible products, including music, videos, software and e-books.
Overseas companies that sell more than NZD$60,000 to Kiwis in a 12-month period will be required to register with Inland Revenue and collect GST.
This is the first step towards charging GST on other goods and services bought online, including apparel and electronics.
McClay says it will create a level playing field between overseas and local suppliers.
“GST should apply to all consumption that occurs in New Zealand. This is what makes our GST system fair, efficient and simple,” says McClay.
“The growth of online digital and overseas services means the volume of services on which GST is not collected is an increasing challenge – for the Government in terms of the GST revenue foregone, and as a matter of fairness for New Zealand suppliers of services and intangibles who must account for GST in their pricing structures.”
Retail NZ general manager of public affairs, Greg Harford, says the Bill is a wasted opportunity to level the playing field for all Kiwi retailers.
"This bill further delays addressing the issue of low-value goods which is a long-standing and significant problem that disadvantages domestic retailers and has negative repercussions for the whole economy,” Harford says.
"If we are going to have GST, it needs to apply across the board."
The proposed new rules would come into force on 1 October 2016.
Australia is planning on introducing similar rules that will apply from 1 July, 2017.
Booksellers NZ has criticised the proposed bill, with chief executive Lincoln Gould saying it only suits big businesses, not small ones.
"Minister McClay talks of fairness and creating a level playing field. The Bill goes only halfway to rectifying the GST problem with foreign retailers and benefits only big businesses engaged in selling videos, music and e-books,” he says.
“It does not help small retailers, such as bookshops, that face an ever-increasing uneven playing field, where they have to collect GST for the government on the sale of small value goods, while the offshore online retailer does not."
While the new legislation applies only to online services, McClay says GST low-value, imported goods that aren’t currently being taxed are also a concern to the Government.
This threshold is the hot issue for retailers. It lets low value physical goods, like clothes, books and electronics between $225 to $400, enter the country tax-free.
“The growing volume of imported goods means the amount of foregone GST is continuing to increase and raises concerns for domestic suppliers,” he says.
He says Customs is expected to release a consultation document in April 2016 that will seek public feedback on applying GST to low-value, imported goods.
“The Government realises this is an important issue for New Zealand retailers,” he says.
“However we are not willing to move unreasonable cost or inconvenience on to consumers. For this reason, Customs has been asked to work through a number of logistical issues with stakeholders and is expected to release a consultation document in April 2016 that will seek public feedback on the practical implications of options to streamline the collection of duty, including GST, on low-value imported goods,” McClay says.
Harford said it makes no sense that Amazon will be required to collect GST on the sale of an e-book, but not on the sale of a printed book.
Gould questioned the time frame.
“It is unclear why Customs takes any longer to rectify this issue than the Department of Inland Revenue, given the years that it has been on the table. And the recently released guidelines on the issue from the OECD pointed a way forward, which other countries have followed already,” he says.
A recent survey by MYOB found that 41 percent of those surveyed in the retail and hospitality industry said they’d vote for GST on online low-value goods to be introduced, while 31 percent were against it.
Other sectors outside of retail are also growing more supportive of the initiative.