Government announces further tax for Kiwis buying low-value goods online

The Government is set to announce further measures today to collect 15 per cent GST on low-value goods bought by Kiwis online from overseas, a so-called "Amazon tax."

The tax will be on anything under $400. Anything above $400 already attracts duties.

It follows on from the "Netflix tax" which started in October 2016 and which required foreign providers to levy GST on digital services sold to New Zealanders including Netflix, Spotify, iTunes, Kindle, online games and software.

In November, Revenue Minister Stuart Nash promised further action, saying that leaving out low-value physical goods gave an unfair advantage to overseas sellers compared with New Zealand sellers.

Stuart Nash is set to announce the introduction of GST on online purchases under $400 today. Photo / File

Today, he and Customs Minister Meka Whaitiri are due to make an announcement at a bookshop in Wellington.

GST is payable on all goods bought in New Zealand, including online purchases such as books bought on Amazon or Book Depository or goods from Alibaba and e-Bay.

But the cost of collecting it on small things such as a $40 book means it is not collected.

Today's announcement is likely to find a way to make large sellers comply with New Zealand law by registering and collecting GST.

While the tax will be paid by the foreign firms selling the goods the cost would inevitably be passed on to the buyer in the form of increased prices.

The new tax was expected to raise about $64 million in the first year rising to $81m in two years as the amount of online shopping continues to rise.

As a result of the "Netflix tax," about 200 overseas companies registered with Inland Revenue and now pay tax to New Zealand.

Retail New Zealand and Booksellers New Zealand are expected to be delighted.

Lat year Nash said the National Government had not gone far enough when it introduced the so-called "Netflix tax" to gather GST on services and electronic purchases.

"It gives a 15 per cent competitive advantage to [retailers] overseas. While our retailers had to deal with GST, overseas people didn't. It's the right thing to do."

The tax being announced today had been planned by National with Judith Collins sending a paper on it to Cabinet in July last year.

The "Netflix tax" kicked in October of 2016, requiring sellers such as Apple to charge GST on online purchases from New Zealand.

Despite that, today's announcement would be seen by many as another broken promise by Labour which committed to no new taxes in its first term.

But applying gst to low-value goods was not part of that promise by Labour's revenue spokesman at the time, Michael Wood.

The process was already being developed in the system by IRD under the National-led Government.

It came after a review in 2015 found the Government was missing out on about $180 million a year by not collecting GST on online purchases, including $40m from shopping on iTunes, Netflix, Spotify and other online services.

Nash's move was heralded as "the first time that a Revenue Minister has committed to fixing this issue" by Retail NZ spokesman Greg Hardford.

Local retailers had long been at a disadvantage to overseas sellers, Hardford said.

However, that did not impact on purchases of goods from overseas which were worth less than $400 until now.

The same tax will be introduced to Australia in July.