A group representing retailers said yesterday’s budget was “deeply disappointing” and that the government missed an easy opportunity to cut the deficit because overseas-based websites still do not have to pay GST and duty.
Retail NZ said forcing offshore businesses to charge GST and duty could halve the $684 million deficit delivered by the budget.
“The government is moving to introduce new taxes at the border, but is ignoring an existing loophole that is costing the country between $200 and $500 million in lost tax revenue,” said Retail NZ general manager of Public Affairs, Greg Harford.
“The current loophole means foreign firms selling to New Zealanders don’t have to pay the same taxes and duties that Kiwi firms do. This means that foreign websites have an unfair advantage over Kiwi firms, which are forced to collect GST and pay it to the government.”
In addition, Kiwis selling goods to customers in other countries are usually called on to pay taxes and fees before the recipients get their deliveries.
“GST pushes up the costs of goods and services purchased here by 15 per cent, providing about 17 per cent of the Crown’s total annual revenue but driving New Zealand firms out of business and costing jobs,” added Harford.
“This issue can be resolved reasonably simply, and we are deeply disappointed that the government has not acted in this year’s budget to close the loophole.
“If overseas retailers will not or cannot collect GST, Retail NZ wants all goods worth more than $25 stopped at the border rather than the current $400 threshold, until someone pays up.
“New Zealand has the second highest low value threshold in the world after Australia, and both our countries are seriously out of step with most other jurisdictions. Its $400 threshold compares to $20 in Canada and $15 in the UK.
“It’s time for government to commit to a time frame for action.
“We’ll redouble our efforts to work with the government on this issue.”
Budget documents do however acknowledge retailers’ “legitimate concerns” and repeat the government’s commitment to ensuring New Zealand receives a fair share of revenue from consumption occurring within its borders.
This is underscored by PwC partner and GST specialist Eugen Trombitas. He said the budget signals that New Zealand is looking at following Australia’s recent lead in taxing services purchased online from offshore sellers. Low value goods purchased online will also receive due attention.
The Australian Government in its budget earlier this month went some of the way by announcing a Netflix tax on imported digital products and services, but left goods out in the cold.
“New Zealand can’t ignore this issue any longer so it’s encouraging to see that budget 2015 confirms this is a key focus area on the tax policy work program as the digital economy has a profound impact on GST,” pointed out Trombitas.
“Making up around 30 per cent of the government’s tax take, GST is a tax on consumption and when this consumption is taking place in New Zealand, GST should be charged. New Zealand retailers and businesses have been insisting on a level playing field and there’s a danger we could fall behind the international pace and best practice if nothing is done soon.
“Another key consideration is there needs to be a specific solution for goods and another specific solution for services.”