After much lobbying and many stops and starts, the Government has confirmed a proposal to require overseas vendors selling into New Zealand to register and collect GST on all goods at the moment of sale. The proposed legislation is to take effect from 1 October 2019.
The existing system sees only items sold into New Zealand online for over $400 subject to GST, which is collected at the border. All goods sold online to Kiwis by foreign companies for less effectively are GST-free, giving overseas retailers a tax advantage against their New Zealand equivalents that Retail NZ general manager for public affairs Greg Harford has described as a “systemic competitive disadvantage” for Kiwi retailers.
“GST is supposed to be a universal tax on consumption in New Zealand, but that has been undermined by the steady growth of online shopping and the rise of foreign websites selling into New Zealand,” Harford says.
He says the previous Government’s delay on moving against this issue seriously impacted New Zealand retail businesses, but today’s announcement has meant Kiwi retailers can now focus on delivering great customer experiences, without suffering “a competitive disadvantage imposed by Government.”
Customs Minister Meka Whaitiri explains that the law changes announced today will see offshore suppliers required to 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 mean some goods will become more expensive, and some less, but the tax treatment on goods above $400 will not change.
“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,” says Whaitiri.
The changes will come into effect from 1 October next year. Revenue officials conservatively estimate that $53 million would be collected in 2019/20, increasing to $78 million in 2020/21 and $87 million in 2021/22.
Revenue and Small Business Minister Stuart Nash came under scrutiny for “jumping the gun” on the de minimis announcement in November 2017, when he confirmed offshore retailers will be required to pay GST on goods under $400 sold into New Zealand online before pulling back in the days following.
“There are more than 26,000 small businesses employing more than 62,000 people in the retail sector,” Nash said today. “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.
“Small businesses such as bookshops have convincingly argued they are penalised by a system which is badly out of date. It’s particularly difficult for very small shops outside the main centres. Some Kiwi firms are doubly disadvantaged, as online retailers who sell into Australia will soon pay GST to the Australian Tax Office,” Nash says.
Nash has also acknowledged the work of the previous Government in beginning the project which culminated in these changes.
The Government is now inviting feedback on the proposed changes. Submissions are due by 29 June 2018, and more details can be found on the IRD's website here.