Govt announcements ‘create new GST loopholes’

“The Bill goes only halfway to rectifying the GST problem with foreign retailers and benefits only big businesses engaged in selling videos, music and e-books”, says Gould.

Allan Bullot is a tax partner at Deloitte.

The amount of GST not collected through online buying is valued at about $180 million a year.

However, to reduce compliance costs, offshore suppliers won’t be required to return GST on supplies to New Zealand registered businesses, or to provide tax invoices.

US-based Netflix, the world’s largest streaming television and film service, launched in New Zealand earlier this year, prompting Spark to complain its Lightbox service was at a disadvantage because it was subject to GST.

THE New Zealand government is moving to slap the goods and service tax on online service purchases, which will mean a price rise for the likes of subscriptions to Netflix and Apple services.

“It makes no sense to make massive global firms like Amazon register and charge GST on an e-book at the point of sale, but not a physical book”.

The proposed measures would apply to cross-boarder “remote” services and intangibles supplied by offshore companies to New Zealand resident consumers, requiring the offshore company to register and return GST when their supplies to New Zealand residents exceeds NZ$60,000 in a 12 month period.

“The fact that GST isn’t charged on low-value imported goods that are below the Customs’ de minimus threshold is also of concern to the government”, McClay said.

“The proposed changes would broadly follow the OECD’s recommended guidelines, as well as the rules that apply in other jurisdictions, such as Member States of the European Union, Norway, South Korea, Japan, Switzerland and South Africa”, says Mr McClay.

Tax foregone is estimated to be growing at 10 percent a year, with goods purchased overseas accounting for about $140 million, and services $40 million. 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.