The Revenue Minister has the go-ahead from the Tax Working Group to require overseas businesses to collect and return GST on any products worth less than $400

The Revenue Minister has the go-ahead from the Tax Working Group to require overseas businesses to collect and return GST on any products worth less than $400

The Government has confirmed it will implement a so-called “Amazon tax,” which it says will level the playing field between offshore companies and Kiwi businesses.

At the moment, foreign companies are not required to collect GST on goods that cost less than $400.

Revenue Minister Stuart Nash says the Government will require any company that does more than $60,000 worth of sales to New Zealand a year to collect and return GST to the Government from next year.

The rules will create a more even playing field for Kiwi businesses, he says.

Nash says New Zealand’s 26,000 small businesses are in competition with foreign firms that enjoy this tax break.

“Large multinationals sell exactly the same product into our market without collecting GST.”

The previous National Government was pushing for this tax and, in a 2017 discussion document, agreed to go forward with the policy.

Nash says it’s that document that forms the basis of the Government’s decision on this issue.

“The former Revenue Minister Judith Collins got the ball rolling on this and it is a pleasure to complete her work. This is an example of an issue with cross-party support.”

The changes would take effect from 1 October 2019 and submissions are open until June 29.

The tax has received the seal of approval from the Tax Working Group.

In late February, Nash wrote to the group asking for its advice on the policy.

“The Group has considered this issue and agrees that, in principle, GST should be collected on low-value imported goods,” the Group’s chairman, Michael Cullen said in a letter to Ministers.

He says the policy is consistent with New Zealand’s broad-based, low-rate GST framework, adding that the current system is unfair for Kiwi companies.

The Group recommended any offshore suppliers should be required to register so they can collect and return GST.

Will the costs be passed on to consumers?

Prime Minister Jacinda Ardern says it will “be interesting” to see if some of the bigger players which will be impacted by the rules, will put the costs onto Kiwi consumers.

Meanwhile, BusinessNZ has welcomed the moves – saying the rules will help to make New Zealand’s tax system consistent with other countries.

Its Chief Executive Kirk Hope says New Zealand retailers would welcome the move and said there would be benefits for customers as well.

“It would not mean extra compliance for New Zealand customers, and it would provide some certainty around pricing of imported goods.”

Retail New Zealand General Manager Greg Harford says the move will create a more level playing field.

“For many years, New Zealand retailers have been disadvantaged by the fact that they have to pay GST on sales in New Zealand while foreign websites in direct competition with Kiwi firms do not.

“GST is supposed to be a universal tax on consumption in New Zealand, but that has been undermined by the steady growth of online shopping and the rise of foreign websites selling into New Zealand.”

He says the previous Government dithered on this issue for many years and it has seriously impacted New Zealand retail businesses for a long time.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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73 Comments

Haha, the only time the COL thank National and it's tax related. Good luck making this work efficiently when there are multiple sellers of the same goods on a sales platform.

15% would be collected on the online platforms (Ebay) at time of payment. I suggest in the case of Chinese ones like Aliexpress then it could be collected via credit card interchange? It wouldn't matter that there are multiple vendor/sellers - its quite workable. I think National stalled for time on this because it screams protectionism. More protectionist signals are appearing from all directions now so it seems to matter less these days.

A lot of online based goods will still be raging bargains after the is 15% added :-)

I don't think paying an extra 15 cents for an item on Aliexpress is going to help local shops anyway.

Why would you think the intention is to help local retailers? It's about getting a slice of the pie. Not that there's anything wrong with that. But at least it will shut up local retailers complaining about offshore sellers not having to pay GST. They will still be out gunned on price.

Agree. I've become a convert after seeing a neighbour outfit his home with LED R80 substitute wireless controlled bulbs for a fraction of the local retail price. There will no doubt be a few dud products but it beats throwing money at Mitre 10 etc.

Yeah...the difference is just too great, isn't it? We recently bought a bunch of items of AliExpress (for personal use) that we'd seen a local NZ company drop-shipping. From the local company? $5 per item. On AliExpress? 50 cents per item.

On the other hand, I support my local bookstore because for a lot of books they're not much more than Book Depository, and I like having them around.

I'm all for supporting the local bookstore. Unfortunately for me (and them) they shut down and I ended up going to their closing down sale.

@EX-EXPAT , you are 100% correct , the price of LOW WATT LED lightbulbs in New Zealand is a bloody disgrace .

I bought a box of 24 online ( made in Europe came bubble wrapped ) for the price of 6 at Mitre 10 .

I suspect there is a single importer or agent or maybe a cartel who is just ripping us off .........

Anyone selling 230 volt appliances in NZ , including lightbulbs , must have them certified for NZ. that starts at around $10K, so that cost must be divided by the number of bulbs etc.

I wonder if insurance companies would void a claim in the event of a fire if it was deemed to be caused by non compliant electrical product?

Most often they will go after the insurer of the product if they can. Even down to the manufacturer of a component within a product. Denying an individual claim not so much.

Just bought 10 12W Dimmable Warm White MR16 12V LEDs for $4.12 each. If these work out ok, then I have another 45 halogens to replace. The existing bulbs may be cheap but they seem to blow as often as RP posts his messages of impending doom so I'm tiring of replacing like with like.

A few of the bigger players are already collecting GST. I bought something from LL Bean a couple of months ago, and GST was included in the charges. Of course, I have no idea whether it's actually found its way to the local coffers.

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Ex Expat, are you on the National Party pay roll?

No. I joined the National Party as a member after the last election (previously advised in posts), but have no other connection. I'll be without a job soon so maybe I could leverage off my posts. How much is the going rate? I suspect a few leftie posters here could be on political pay rolls.

Glad you're an impartial commentator...

... I like to think of myself as a neutral commentator ... the Switzerland of blogging ( except without hoarding some one else's gold ) ...

That way I'm free to take pot shots at everyone ...

... and then to scurry off to the safe haven of the hills ... if those about me launch Armageddon on each other ... especially if its due to me stirring them up ...

Ahhhhh .... life at interest.co.nz is good folks .... and getting gooder every day ...

Aahhhh .. good old Switzerland with all its gnomes .. or was it trolls ?

Not sure I've seen many post here over the long term and clearly be impartial. Gingerninja would be the front runner for the crown on that attribute. Kate has her 'academic' moments but is up there as well. Some pretend to be, but I suspect that's a ruse (classic tactic to strike rapport by saying you were once a sinner but now see the light). Overall I don't see partiality is a problem as long as it's disclosed. To my knowledge I'm the only one that has volunteered being a member of a political party. With political party membership in the tens of thousands are we expected to believe that none other than me post here?

I confess...I've voted for National more times than any other party. And still never for Labour.

However, I'm certainly well aware of your struggle with that fact. Hard to conceive a regular voter for a party might ever be less than happy with their performance.

Funnily enough, I used to provide paid services to National though was never in their employ.

I don't agree with everything National has done, I just agree more with them than any other party. As I've said before, I'm a frustrated ACT voter in that I've never had the confidence to give them my vote in case it allowed the Left in.

Yeah, I'd definitely agree you'd probably have more philosophical alignment with ACT. I see National and Labour as very, very close together (especially since Key - as per many NBR commentators' laments)...both roughly equivalently socialist parties with slightly different favourites. Largely reflecting NZ society, I guess.

National should not have lost power but they have only themselves to blame. Complacent, conceited and careless in the end. Still even so they would have been hard pressed to form a coalition especially as to how they approached WP which aptly sums up the above three C words. Rather significant as to how any “ coalition” partners National have had, have little life expectancy.

Umm, Labour and National aren’t socialist. Neither are the Scandinavian countries often sited. What definition are we running with here?

The lazy, generic catch-all roughly fitting in the first paragraph of the Wikipedia definition. More social democracy than socially-owned production, in fairness.

Interesting enough there are multiple forms of bias much of it harder to detect in online comments

https://upload.wikimedia.org/wikipedia/commons/1/18/Cognitive_Bias_Codex...

No one can be truly impartial and often many will be in shades of grey instead of the two sides of black and white. Left and right, red and blue teams etc are quite odd artificial constructs. Lucky in NZ we can have more than just the two party system. Not far off though and certainly many people need to simplify to us vs them because handling grey areas & real human differences is more complex and harder to have a personal crusade.

The tax itself is nothing. Even with an extra 15% tacked on, it will still be 50% cheaper to buy online.

The issue is choice. I see a lot of companies just going pffft. Not worth the admin to sell to NZ, so will stop shipping to NZ. So everyone will resort to the Forwarding companies (Youshop, etc...) and overseas relatives/friends/etc... to get the stuff here.

The question then becomes will Forwarding businesses have to pay? or is every single product now going to spend a month or two in customs while it is sorted out.

It seems like a lose/lose scenario for everyone involved.

Yes that is the rub. Most of what we ourselves buy overseas is simply not available in NZ. But suppose if you want to buy that NFL jersey from a small discount on liner, then it won’t be affected anyway. Guess when the NZ retailers realise that the problem is actually their own limited ranges and options coupled with unjustified margins and that this “Amazon “ tax has made absolutely no difference, they can carp and moan & get it raised to 30% and beyond. Hard for us to call Trump out on protectionism now.What’s next though. Tax on Trade Me purchases? Customs duty allowance at airports reduced to line up? This is a tax happy government. They did signal that & even though there was a hasty U turn in the nick of time pre election, they will not be thwarted.

Bear in mind this tax was originated by National and the first stage (above $400) introduced under them. As far as stuff I recall in the past, twas always the plan for the IRD to work on getting its cut below that too.

Eh? this tax was originated by the Fourth Labour govt in 1986. the tax is GST. Same GST as you pay on everything at the supermarket. All this is, is a removal of a waiver that previously existed because it wasn't worth the effort of collecting it. Current govt has decided otherwise.

The move to start applying it to overseas purchases was a move initiated by National in the last couple of years. Sorry, didn't realise that wasn't clear in my comment. You're right that both National and Labour were applying an existing tax.

@noncents , yes you are right , this will never 'SAVE ' the NZ Retailers who have had it so good for so long , and cannot adjust to the new order of things

no nothing changes for customs, that is what took so long to bring this in without creating a huge workload for all involved in NZ, hence putting it back to the seller to collect and not to be collected at the border
the proof will be in the pudding as i can see amazon collecting as they have set up in aussie and have now changed their website to detect if you are buying from NZ.
BUT other countries where its the practice of flouting laws catching and banning those companies from exporting to NZ will be interesting to watch to see how successful NZ customs are

...such as ali express...good luck collecting on $1.00 trinkets from that platform - at least we don't have to pay $29.95 to a local retailer for that same $1 item.

maybe they should introduce 5000% tax on said platform...to 'even out the playing field'

can't wait for ring fenced losses and CGT on everything including the family home.

Collection of the GST should be pretty easy for those platforms such as Aliexpress etc. Delivering to NZ? then add GST 15% at checkout time.

But if I read the details of this correctly, sites dealing in less than $60,000NZD per year to New Zealand won't have to pay - how is this going to be proved? Say a site in the UK that gladly does send to NZ but likely do not do it very often, what do they do? How do we assess them in reaching that 60k threshold?

Tax-by-ship-to-address is common to competent selling platforms. So aggregators like AliExpress can simply add the tax to the throughput to said destinations, still offer free shipping folded into the sell price, and continue to undercut NZ retailers by prices that are 10-30% of the locals. Won't change a thing in terms of buying patterns......

Are you saying a 15% discount doesn't change buying patterns?
Personally I would rather buy stuff locally (consumer guarantees act, etc), but if the price is completely out of whack I would buy from overseas. This will level the playing field a lot.

Thats the thing, prices from overseas websites are that much lower that adding 15% onto them doesn't make local sellers competitive, not even close in some cases.

CGA doesn't bother me much for most things I buy from overseas, they are either so cheap they are disposable type items that i'm not going to bother taking back to the shop anyway, or they are a quality high tech item that has a very low chance of failing before it becomes obsolete anyway (eg PC parts).

15% increase on a small amount is nothing. If you buy a product for between 10-50% of the price you would pay locally the GST is insignificant.

There are some things you just don't buy from Aliexpress like precise instruments, memory cards or sex toys (there are reports of them being so toxic that they burn skin on contact). In some cases the price is so low that people think it's worth the risk for plugs/connectors, network cable, electronics etc.

Yes on some items it won't make a difference. But on a lot of items (e.g. proper name brand items) you can't get them much more than 15% cheaper. This will level the playing field on those.
Can you give me a good reason why they shouldn't charge GST on them?

I don't see any reason why they shouldn't charge GST on those items. If I'm buying computer parts or servers having local service is usually more valuable, and GST on business expenses makes no difference to me.

Although they are introducing this when the GST rate needs review. I think 15% is too high for the end consumer.

That might be a common skin allergy to the materials. Quite common even for what you buy in NZ (as it is generally the same but just passed between a few more businesses). I would recommend skin testing, always check materials and sometimes certain ingredients are better for sensitive skin. Partner had their finger go blue & blister with a silver ring due to a skin allergy. Other metals, latex, materials & ingredients etc can cause issues. Many are coated with substances that aggravate those with skin sensitivities as well. Lots of alternatives though and since it is all being shipped from China without checks anyway. Electronics also apply, often they are sold in NZ without the extra checks, often even illegally.

A potential problem with tax-by-ship-address are "VPN" delivery services - like YouShop. Not sure how the likes of Amazon are meant to deal with that .

Finally NZ Post has some good news to increase usage stats

Successive governments keep proposing this, but I suspect give up because of the technical and logistical difficulties. If they can find a way to collect just GST and duties if applicable without also levying those unreasonable processing fees, which are what really gets people wound up, and don't place unreasonable burdens on very small-scale microbusinesses like VATMOSS did, then sure. Until solutions to these obstacles are found, then I think the current system is best. Collect, unless it costs more than to waive. The threshold for paying GST/duties is already pretty low, and kicks in at about the level of a pair of decent boots. Let's hang back a little, and see how it works out in Australia before making any changes.

I'll have some real anger management issues if it results in small independent traders, such as on Etsy or eBay deciding that it's just too hard and too burdensome to sell to NZ. I'll also have a severe lack of goodwill towards local retailers if they continue failing to offer decent ranges, or basic things like different leg lengths on pants, and continue charging those huge just-because-we-can NZ Sucker Mark-ups, and will boycott the hell out of them. We know that a lot of the impetus for this is coming from pressure from the retail lobby, but that could well backfire on them. The public are already beyond pissed off with local retail and know how they're being gouged.

DP

Are New Zealand companies paying GST when they advertise on the likes of Google and Facebook ? Some spend megabucks there. Clearly lots of those platforms evade New Zealand income tax on their New Zealand business. But where does the GST sit ?

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Taxinda strikes again ... ... I thought they said no new taxes in their first term of office ... not 100 new ones within the first 100 days ....

... what is it about this Labour-Greens ( where's Winston ! ) government which seems to be sucking all the fun out of life ...

Is GST a new tax?

Its okay for politicians to intoduce new taxes like this,all they have got to do to avoid it is to get another poli going overseas to buy whtever item they want for them.

The GST isn't a big deal here, but this will cut out many online shops from NZ altogether and kill much needed competition.

Now I have to pay Normal Price + Shipping + Price hikes due to only a dozen shops shipping here + GST. That's if I can even get the item shipped here at all!

The winners are the local ripoff crowd like Harvey Norman and a half dozen internet giants like Amazon who can be bothered with the compliance costs. The losers are us frugal shoppers who are fiscally disciplined enough to shop around and wait 2 weeks.

The local shops are already at an advantage with faster shipping. Maybe they should sharpen their ridiculous prices if they're not selling enough.

It's easy to go after the small guy while deliberately ignoring the elephant in the room: land owners receiving unearned wealth from the activities around their land. We're doing a tax working group report but nope la la la no such thing as land tax.

We're expected to take the globalisation approach when it comes to the 100,000 "long term" immigrants who come here every year yet when it comes to any need such as shelter or food then it has to be bought locally.

What a joke.

... we've had so many tax working groups in the past ... and the government of the day has usually completely fobbed off their findings as " ideological burps " ( Sir Mickey Cullen ) ... or they've ham-strung the breadth of the research so as to reach an accord with the current government's policies ...

The elephant in the room is the massive wealth of land in this country .... the untouchable asset .... land ... the goldmine that could keep on giving if we ever got a government with big enough kahunas to tap into it ... An across the board land tax .... no exemptions ...

The implementation issues are endless.

So are we expecting ali -xpress and frends to modify their online software to add 15% to transactions sourced from NZ? Firstly why would they bother and seocondly, how would IRD ever get paid form China?

And what expenses do we allow ali express as a gst credit? In NZ the book might cost supplier $12, sells fopr $15, the gst is on the net differnce. Can ali express claim more gst expenses than sales and get an ird refund?

Which leaves credit cards. Once again, is AMEX really going to write software just for NZ?

And I can imagine that, disputes left right and centre as gst is added to the wrong trasnactions, credits for refunds, and so on.

How can this possibly work?

Was reading an article about it in Stuff this arvo, and there was talk of exemption for smaller players, turnover <$60,000 or less, which would avoid a lot of problems. That's what turned it into a vast fustercluck when EU VAT was put on cheap downloadable products. There are thousands of sellers producing things like pdf knitting patterns, embroidery transfers, tattoo designs, woodworking plans, that kind of thing, some of them only selling a few a year, and the committee who formulated the policy completely overlooked their existence. It was supposed to bring the big fish like Amazon and iTunes into the net, but there was a lot of collateral damage on the cottage industry minnows. I know a bunch of people who had hobby businesses selling pdfs for a few bucks apiece, who now just give them away for free, because complying with the tax laws was just impossible.

Expectation was that sales platforms like eBay and Etsy would collect on behalf of sellers, and if that can be streamlined so it isn't a huge expensive arse-ache for anybody, shouldn't be too much of a drama. If GST can seamlessly be added to my total when I do an eBay PayPal payment, and I don't have to muck about paying a ransom to Customs to get my goodies, then I wouldn't begrudge it.

But yeah, if AliExpress or whoever collect it from buyers and don't return it to NZ government, what are we going to do? Invade them? I can see this idea being parked up yet again because the implementation technology and logistics just aren't feasible.

Maybe better to look at the bigger picture and ask whether GST is an obsolete tax.

Aliexpress is just a marketplace like eBay. I would guess many sellers don't sell more than $60k. But no doubt eBay / Aliexpress will be caught in the net anyway.

These people clearly dont have a clue what they are able to do .

Firstly , this implies that every Company sending goods to NZ will be registered for GST here .

Secondly , how can they claim input credits on their costs , because this would be the fairest way of treating the transaction , in fact you cannot treat it any other way .

Frankly , its a can of worms , and the effort is not likely to be worth the reward

And its not going to help New Zealand retailers who are price gouging , and thats almost all of them

Heres an example , a pair of Pointe Shoes for my daughter is $270 at the specialist ballet supply store

It can be imported from Gaynor Minden in the US online for around US$50

Kiwis are being screwed by retailers

*Secondly , how can they claim input credits on their costs , because this would be the fairest way of treating the transaction , in fact you cannot treat it any other way .*

True, they can claim back all the NZ GST they have paid on their NZ operations... so, precisely nothing would be my guess.

@Pragmatist , you need to be pragmatic , the mechanics of this are likely to be a nightmare to enforce

Its a case of the The road to hell is paved with good intentions

lol, I am being pragmatic, you are just making up BS objections because its something the Party you don't like did. There are no input credits, because they don't have NZ operations, so they aren't paying NZ gst on anything, therefore nothing to claim back.

And yes, enforcement is going to be spotty, and many loopholes, so what? at least it will raise some more revenue to pay for rebuilding the infrastructure in this country.

true, not paying NZ gst on inputs. What will we do if China decides that we should pay their equivalanet on our online exports? i can see trade agreements creating havoc with this...as we will be imposing a tax on another countries exports are we not? i.e a tariff.

I've never sent anything to china, but if they have a GST/VAT type tax i'm sure they are charging their citizens it on all our exports. These aren't unusual taxes, lots of countries have a GST/VAT, and imports get charged it usually.

We already apply this tax on other countries exports over a certain dollar value.. all thats changing is we are dropping the level below which we don't collect it. its not a new tax, just more rigourous collection of it.

It is pretty analaous to state sales tax in the US, bigger online stores charge the sales tax due for the state the goods are shipped to and pass the sales tax onto the appropriate state govt.

..its politics at it's finest boatman. Aus have just postponed...and I bet they do it again and again....

https://www.smh.com.au/business/the-economy/amazon-ebay-etsy-and-alibaba...

Good link .. this tax will be dead on arrival.

Same thing as here. I remember this tax being proposed every two or three years, at least three or four times now, by successive governments, and every time it collapses and is postponed as soon as they look into the practicalities of getting it done.

Just scrap GST!!

I agree with Phi Phi - Scrap GST - the implementation of it is fraught with a miriad of complexities and compliance issues. What we should have is a transactions tax levied of about half a percent on all withdrawals from bank accounts. The deduction and payment to IRD could be done automatically by bank software as is done for bank fees. Simple and effective.
A collective sigh of relief from all businesses who will end up with reduced costs of compliance and lower accountants bills as well as more business as costs reduce and consumers are left with more in their pockets to spend. We'll have to find new jobs for quite a few IRD employees though!

Totally agree Phi Phi and S.Creditor - the only fair GST is no GST.
Increasing the GST base is obviously new tax and every new tax is yet another violation of the Labour pre-election promise.
I don't understand what power NZ Customs have to hold parcels from buyers when GST applies to sellers and it is the overseas sellers who are allegedly going to be made liable to pay the new GST/ new tarriff. Also, it is obviously far too expensive tor NZ operations to compete so they should give up, sell up, take a seat and watch NZ collapse under the CoL tax deforms.

How is it going to work on platforms like ebay and amazon when you are not actually buying from ebay or amazon, but from a third party, who is simply using the selling platform? It's not ebay or amazon sending the item, or making loss or profit on it? How will NZ Gov regulate which of the little seller have gone over the threshold or not? I often buy random things on ebay from the US or the UK, random antiques or vintage things, the seller has never sent to NZ before often, and there is no way that they are anywhere near the threshold for GST... it's not ebay doing the sale. So how do they address that?

Ebay already has it. That is already has it for Singapore. It's a small matter to include it for NZ as well.
Its simple - if the total cost goes over $400, there's a customs charge in addition to the shipping charge.
Easy peasy, and still much cheaper to order from ebay than a local supplier.

Yes but ebay is not the seller, ebay is the selling platform. It would be like charging the owner of mall money on the GST made on each sale at each shop within that mall. There are millions of sellers on ebay. Does this mean that GST is taken at purchase, even though your seller is below the threshold for GST?

Yep it’s going to be complicated and costly beyond imagination & cost efficiency. So if Amazon are to automatically tax you because their system recognises you are tuning in from NZ, what happens when we want to purchase a gift on Amazon USA as a gift for friends who live in the USA? or are they going to hit you up on the basis of a NZ shipping address? Or both? So what happens when we buy from a USA website, ship to our USA friends & they ship to us? It’s going to be a circus. How long exactly has the Australian system that we are mimicking been going?

From my experiences of online shopping I find two significant advantages over buying locally.
1. The products sometimes are considerably cheaper abroad with traders in NZ often offering goods at almost double the retail price in UK or USA. A 15% GST add on to a much cheaper price, even with postage added still makes buying abroad worthwhile.
2. Shopping online gives the customer a better choice over and above the stock that the NZ retailer carries.
This new GST regime of charging is not going to benefit NZ retailers by any significant sum. To compete retailers here need to lower their prices and accept that we are living in a global market where prices can be compared around the world very quickly because consumers mostly buy with price, rather than service, being the driving force behind where the purchase is made.