GST on overseas spends going ahead in October

The Government will start charging GST on overseas online purchases.

The Government will start charging GST on overseas online purchases such as music and e-books from October next year.

Revenue Minister Todd McClay introduced legislation to make the move today.

It will require overseas suppliers who sell to New Zealand to register and return GST if their sales to New Zealand residents exceed $60,000 in a year. It will apply to companies selling either digital services, such as music downloads, and other services such as remote legal and accounting services. The offshore suppliers would not have to provide returns for sales to New Zealand businesses and in some cases, where suppliers sold good through an electronic 'marketplace' the marketplace would register rather than the supplier.

Mr McClay said the move, which the Government had earlier announced, was driven by a the need for a level-playing field for New Zealand businesses. The increased volume of offshore online buying also meant the Government was losing about $40 million in GST a year. Mr McClay said similar rules applied in other countries, including Australia.

He said the Government was also concerned at the no-tax threshold on low-values goods bought from overseas. Currently people who buy goods up to a value of $400 do not have to pay GST on them at the border, partly because of costs of collecting it outweighed the revenue. He said the growing volume of imported goods meant the amount of foregone GST was continuing to increase and local suppliers were concerned.

"The Government realises this is an important issue of New Zealand retailers however we are not willing to move unreasonable cost or inconvenience onto consumers." He said Customs had been asked to consult on the logistical issues of collecting GST on cheaper goods, and will release a consultation paper in April next year to get feedback on the implications of streamlining GST collection on low-value goods.