iTunes, Netflix, could have GST added

Legislation was introduced today to bring about the GST changes. Photo / Getty

GST effect

iTunes album
Now: $19
After possible GST changes*: $21.85

Netflix subscription
Now: $10-$16/month
After possible GST changes*: $11.50-$18.40/month

* Increases will depend on whether companies absorb costs

The price of Netflix, iTunes, e-books and other foreign online services could jump by up to 15 per cent next year.

The Government today confirmed an October deadline for introducing GST on nearly all intangibles that could be bought from foreign websites, including digital downloads, pay TV subscriptions, apps and remote accounting and legal services.

Any changes in the price of these products would depend on whether foreign firms such as Apple or Amazon absorbed the 15 per cent tax or passed it on to consumers.

Legislation was introduced today to bring about the GST changes.

Revenue Minister Todd McClay said overseas suppliers who sold to New Zealand would have to register and return GST if their sales exceeded $60,000 in a year.

This was the same threshold for New Zealand-based online and physical companies, which already paid GST.

InternetNZ chief executive Jordan Carter said the policy was a "mixed bag" for internet users.

He said the $60,000 threshold had been set at an appropriate level.

The Government had considered introducing a lower threshold of $10,000, which would have captured many more overseas businesses.

But Mr Carter said he would be concerned if Internet Protocol (IP) addresses were used by retailers to determine whether consumers were from New Zealand because this was a highly inaccurate method.

He hoped the proposals would be honed as they passed through Parliament to ensure they did not have a "chilling effect" on online commerce.

The changes included penalties for people who attempted to disguise their location to evade GST costs. Online consumers who used a virtual private network (VPN) to make it appears as if they were overseas could face fines of up to $25,000.

Mr McClay said the changes, which were outlined in August, would create a level-playing field for New Zealand businesses.

Retailers New Zealand spokesman Greg Harford said that was not necessarily the case because GST was still not applied on all physical goods which came across the border, such as clothing.

The Government is also looking at this issue, but said it was more complicated.
Customs Minister Nicky Wagner said yesterday that proposals on taxing low-value goods at the border would be finalised by April.

Under existing rules, New Zealanders can purchase physical goods from foreign websites tax-free if the duty and GST amounted to less than $60.

A discussion paper released in August showed that the increased volume of online purchases from overseas meant the Government was missing out on about $40 million in GST a year.

PwC released some checkpoints for business and a timeline.
• Services and intangibles supplied remotely by an offshore supplier to New Zealand-resident consumers will be treated as performed in New Zealand and therefore subject to GST.
• The new rules will only apply to B2C transactions and not to B2B transactions.
• From October 1 2016, offshore sellers will be required to register and return GST if their supplies of services to New Zealand-resident consumers exceed NZ$60,000 in a 12-month period.
• The offshore sellers will be required to pay GST on a quarterly basis and the first return will be a transitional return covering the period of 6 months from 1 October 2016 to March 31 2017.
• A wide definition of 'services' is proposed, which includes both digital services and more traditional services such as legal and accounting services.
• In some situations, an 'electronic marketplace' or intermediary will be required to register instead of the principal offshore supplier.