The Government has tweaked its plans to collect GST on online shopping to avoid Kiwi paying more for products, accounting firm EY says.
From October next year, under the revised approach, imports between $400 and $1000 will become slightly cheaper as customs duty and levies will no longer be applied to goods valued under $1000.
The Government's GST collection laws announced earlier in the year may have seen the cost of goods increase slightly when duty, levies and GST was added.
Revenue Minister Stuart Nash today confirmed that new rules would be aimed at imported goods valued at or below $1,000. Customs would retain responsibility for collecting GST on imported parcels valued more than $1,000.
"There are about 26,000 small businesses in New Zealand employing more than 62,000 people in the retail sector. Many are in competition with foreign firms who sell exactly the same product into our market without collecting GST," Nash said.
"We intend to make offshore suppliers 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 simplify compliance and administration costs at the border," Nash said.
According to accounting firm EY, Kiwis will now only be required to pay GST of 15 per cent on low-value goods bought online, under the new proposal. Retailers and online websites will be required to collect this from consumers when each purchase is made, EY said.
EY tax partner Paul Smith said the Government had been savvy to notice and change the rules to avoid backlash from consumers coping a higher bill than usual.
"Consumers of imported goods below $400 will face a slight increase due to the addition of GST to all imports. Under current rules, these goods can be imported GST-free," Smith said.
"The government is banking on overseas suppliers to comply to raise revenue under these rules. If they don't comply, it could be a disaster from a revenue collection perspective."
Smith said the Australian government, which introduced GST collection on low value goods in July, had successfully encouraged 700 overseas suppliers and retailers to register for GST in the country.
The Australian had funded an international roadshow for the Australian Tax Office to promote compliance overseas.
"The newly restructured IRD are stretched and won't have this luxury [here], but IRD will use cross border sharing agreements to target overseas merchants," Smith said.
From October 2019, foreign companies will be required to collect GST if their total sales to New Zealand consumers exceed $60,000 per annum, similarly to the way companies are registered and required to collect GST on digital services such as Netflix and Spotify.
The same threshold already applies to domestic businesses and to offshore suppliers of cross-border services.
Government figures estimate the incoming legislation will be able to collect $53 million in revenue in 2019/20, $78 million in 2020/21 and $87 million in 2021/22.
Retail NZ said it welcome confirmation from the Government that foreign websites selling into New Zealand will have to register for GST from next October.
"New Zealand retailers, which employ Kiwis and deliver economic benefit for New Zealand, have long suffered a significant competitive disadvantage as a direct result of Government tax policy," Retail NZ's Greg Harford said today.
"GST is a universal tax on consumption in New Zealand. Kiwi retailers have been paying GST since 1986, while foreign firms selling into New Zealand have long had a free-ride from the New Zealand taxpayer," Harford said.
"Retail NZ has been campaigning on this issue for a number of years, and it is good news for New Zealand as a whole that the Government has confirmed it will level the playing field.