GST for online purchases to be discussed

The document will be split into two parts, the first covering services such as Apple’s iTunes and Netflix streaming video, and the second on the more complex issue of imported goods, Key told his weekly post-Cabinet press conference in Wellington.

The Government is releasing a discussion document tomorrow on applying GST to online purchases.

The services component will make up the bulk of tomorrow’s document, and could be in place by the end of the year as it’s an easier issue that can be dealt with by registering large overseas companies as New Zealand taxpayers, Key said.

“And in fact there’s about 12 jurisdictions around the world that do that including Europe”.

Asked why New Zealanders should pay tax on iTunes songs – which can cost as little as $1.50 – he said the principle should be the same for no matter how cheap the product. “Why shouldn’t you pay if you take Netflix from offshore or something like that?”

Is the Government set to slap GST on digital purchases?

Earlier, Todd McClay the country’s Revenue Minister had signaled that most probably the Government will be imposing GST on the imported digital products and services.

Australian treasurer Joe Hockey confirmed in May that Australia would also start charging GST on digital imports.

Cabinet has now approved an option to close that loophole.

According to New Zealand Retailers Association chief executive Mark Johnston, the Government was missing out on more than $200 million annually in tax revenue from online shopping at the current limit, but Deloitte tax partner Allan Bullot said the threshold had not been lowered due to the cost of tax collection being higher than the tax collected.

Introducing the GST will make the system fairer for New Zealand retailers, Mr Key says.

“It’s a 15 per cent challenge every time or before a bookshop and small retailer opens their door”, says Lincoln Gould of Booksellers New Zealand.

“Goods will definitely be longer would be my guess because we just need to work through the logistics”, Mr Key says. “It would be disappointing, yes”.

“The likes of Amazon in particular, there’s no reason that they can’t be registered for GST”.