A better GST refund scheme would benefit retailers and make visitors happier, says Cameron Brewer.
Auckland International Airport says it's not uncommon for tourists to turn up with receipts expecting a GST refund on major purchases. Those tourists inevitably leave with a sour taste in their mouths because New Zealand doesn't offer such a facility unless it has been pre-arranged with selected retailers.
As the rules stand, only about 200 New Zealand retailers, mostly in Auckland and Christchurch, are registered to the existing tourist refund scheme. For the thousands of other retailers the cost and effort to offer GST-free makes it prohibitive.
The law dictates GST can only be refunded on purchases if goods are exported or are not taken possession of within New Zealand.
For most retailers any enthusiasm to promote themselves as GST-free is quickly evaporated with the realisation they have to go through a process of registration. Approved retailers have to courier the goods in sealed bags to Customs at the airport for the outbound customer to collect. In some cases such as high-end jewellery retailers, who are unable to get courier insurance cover, they have no option but to hand-deliver the goods to the airport.
Alternatively retailers can post the goods directly to the customer's overseas address and hope the parcel hasn't been stolen from the letterbox by the time they arrive home.
As most New Zealanders have experienced it's much easier when leaving Australia. Once you've gone through the gate, you turn up to the TRS (Tourist Refund Scheme) counter, and produce your purchases and receipts. In exchange you get your GST back.
There are a few more conditions - for instance, single receipts have to be worth at least $300 and the goods have to be bought within 30 days of departure.
What's more, you need to personally show your items to the TRS officer. However, the goods don't need to be in their wrapping. In Australia you can take your purchases out of the shop and use them while on holiday. This makes sense if you've bought a video camera or a jacket. Some people are literally standing up in their purchases as they present their receipt along with their boarding pass and passport.
Tourists visiting New Zealand must think it is strange that neighbouring Australia has such a well-promoted and consumer-friendly scheme yet New Zealand's arrangements are neither.
Tourist refund schemes successfully operate in more than 20 countries worldwide. In 2000 when the Australian Government introduced a 10 per cent tax on goods and services and subsequently their refund scheme, the yield from annual tourism spending jumped 8.75 per cent. Tourists now visiting Australia spend an average of A$1320 each on shopping.
Proponents for a better scheme in New Zealand argue that if even 5 per cent of tourists used the revised scheme, it would add $30 million to retail spending by tourists each year.
A scheme akin to Australia's would benefit retailers the length of the country. Suddenly in the eyes of tourists every piece of New Zealand jewellery, sizeable artwork, or designer fashion garment is effectively 12.5 per cent cheaper. Parliament could achieve this year-round sale by simply passing some minor amendments to the tax free schemes in the GST Act.
Let's not forget that annual tourism numbers will continue to increase beyond the present 2.4 million visitors. Figures show that for October New Zealand welcomed the highest number of visitors for any October on record, with visiting Australians leading the charge. Further, with a softening of the border between the two countries, the number of Australian tourists will grow and Australians will expect to get their GST back.
There has been a long-held view by Kiwis that tourists don't come to New Zealand to shop, rather they come to sightsee. The reality is they do both. Tourism New Zealand surveys show shopping is a leading preferred activity for tourists visiting our shores.
While the Australian Government actively promotes its TRS facilities, New Zealand's own Inland Revenue has been on an awareness campaign of its own. Sick of the confusion, the IRD has been reminding tourists that they have to pay GST on all purchases and that refunds are not easily obtained. This is a negative message and a disincentive for tourists to buy those special gifts while in New Zealand.
I understand the Minister of Tourism, Prime Minister John Key, is keen to review this issue. The prospect of 60,000 visitors heading over here for the 2011 Rugby World Cup is surely a motivator for change.
* Cameron Brewer is chief executive of the Newmarket Business Association.