Online GST

Todd McClay announced:

Revenue Minister Todd McClay says measures proposed in a tax bill introduced today are about fairness and equity.

“It is about creating a level playing field for collecting and putting New Zealand businesses and jobs ahead of the interests of overseas suppliers”, says Mr McClay.

These measures are an important first step in the Government’s efforts to deal with increasing volumes of online services and other intangibles purchased from overseas suppliers that should, under New Zealand’s tax rules, be subject to GST.

“GST should apply to all consumption that occurs in New Zealand.  This is what makes our GST system fair, efficient and simple,” says Mr 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.”

Mr McClay says the proposed measures will apply GST to cross-border “remote” services and intangibles supplied by offshore suppliers (including e-books, music, videos, and software purchased from offshore websites) to New Zealand-resident consumers, by requiring the offshore supplier to register and return GST on these supplies.  

I haven’t got a problem with this. I will have a problem if the de minimis threshold on imported goods is reduced to such a low level, your books and minor purchases are stopped at the border.

The key issue here is how many overseas retailers will actually agree to register. Some will, but not all. The FAQ notes:

Why would offshore suppliers comply with the proposed rules?

When similar rules have been applied in other countries, offshore suppliers – particularly large international suppliers that account for the majority of cross-border services and intangibles – have demonstrated a willingness to comply. For many of these companies, failure to comply with their obligations would pose a significant risk to their reputation.

So I imagine Amazon, Apple will comply. But will Ebay as they are just an auction house, not a retailer?

The bill is here. It says a supplier will treat a customer as being from NZ if there are at least two non-conflicting pieced of evidence, from the below:

  • the person’s billing address:
  • the internet protocol address of the device used by the person or another geolocation method:
  • the person’s bank details, including the account the person uses for payment or the billing address held by the bank:
  • the mobile country code of the international mobile subscriber identity stored on the subscriber identity module card used by the person:
  • the location of the person’s fixed land line through which the service is supplied to them:
  • other commercially relevant information.

The IP address inclusion could be problematic. They are not necessarily a reliable guide to where someone is from. It also means that someone who uses software to mask their country of origin (very useful if you wish to view videos from other countries, or subscribe to US Itunes or Netflix) could end up breaching the GST Act. However a prosecution would only occur if the GST amount was substantial.

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