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.