The online GST proposal

The Government has published a discussion document about what to do with on online purchases. It is here. They key points are:

  • Offshore suppliers will be required to register and return GST if their supplies of services to New Zealand-resident consumers exceed a given threshold in a 12-month period. Submissions are sought on the value of that threshold.
  • In some situations, an electronic marketplace or intermediary may be required to register instead of the principal offshore supplier.

The Government has kicked for touch (for now) the most politically significant issue of the de minimis threshold of $60 GST/fees (or $400 of goods) for collecting GST at the border. That is the issue I am more interested in. If Customs starts seizing my books from Amazon, I’ll be bloody pissed off.

What is proposed in the discussion document is pretty unobjectionable, but that is because they may be unenforceable.

Basically it is saying we’re going to ask overseas e-tailers to agree to register for GST in NZ, and pay us GST.

Some may do so, for reputational reasons. But what if they don’t?

These companies may not have a legal presence in NZ. Will Amazon be banned if they don’t agree to register for and collect GST?

So I’m not sure this will achieve much. It may get some voluntary compliance for reputational reasons, but not too many businesses will rush to pay a voluntary tax. If all OECD Governments agree to pass laws mandating each other’s GST laws must be honoured by their own businesses, then it would be a different matter.

So as I said the big issue for me is the de minimis threshold. There may be a case to reduce it a bit, but if the cost of collecting GST at the border is more than the revenue from it, then the threshold is too low.

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