Govt looking to change GST for online purchases in 2018

Customs wants to change the de minimis to one calculated based on the currency value. Photo / Thinkstock

The Government wants to lower the threshold on online purchases which qualify for GST from mid-2018, but says more work is needed and there will be no change without public consultation.

Currently, online purchases don't qualify for GST and tariff duty unless the total tax owed is $60 or more - meaning a purchase price of about $400. But goods such as clothes, accessories, and shoes attract both duty and GST, meaning charges may be payable when the purchase price exceeds $225, according to the New Zealand Customs Service.

The $60 duty threshold, referred to as the de minimis, is the point at which more would be spent on the administration and collection than would be collected in revenue.

Customs Minister Nicky Wagner today said she is continuing to look at different ways to collect tax effectively, and the government acknowledges a lower threshold "would help to level the playing field, but there's no quick or easy solution".

"Customs needs to look into more detail around what some of the collection mechanism options could look like and what the border transaction fees might be," Wagner said.

"Once Customs has a better understanding of the best ways to collect tax for low-value imports, we will look to lower the threshold, potentially from the 2018/19 financial year."

In a paper presented to Cabinet earlier this week, Wagner said volumes of low-value imports to New Zealand are growing at 14 per cent per annum over a five-year average and Inland Revenue estimated foregone revenue of $140 million per year.

Customs wants to change the de minimis to one calculated based on the currency value of the parcel. The department's modelling on what would happen if GST and duty were charged on imports worth over $200, found the number of consignments would almost double and the cost of processing consignments would exceed the revenue gained, the paper said, and it's "not achievable for industry" to implement it in 2016 or 2017.

Other countries with lower de minimis levels such as Canada, France, and the United Kingdom struggle to collect revenue effectively, the paper said.

Retail New Zealand, which lobbied for the tax to be charged on any import valued at more than $50 as soon as possible, said it was "deeply disappointed by the government's failure to implement an easy solution".

"The reality is that small firms in small town New Zealand are collecting tax for the government, while massive international retailers like Amazon, Asos and Ali Baba are getting away without paying their fair share of taxes," general manager Greg Harford said.

This puts Kiwi firms at a further competitive disadvantage and is costing jobs.

Retail NZ suggested the government should copy the Australian government, which has said it will require offshore suppliers with turnover of more than A$75,000 to register for GST and reduce its de minimis to nothing as of July 1, 2017.

In the Cabinet paper, Wagner noted that details of enforcement and tracking "remain unclear" and GST collection will be the responsibility of the Australian Tax Office, not Australia's Border Force.

"Offshore collection of GST may not be a perfect solution - but it would be a significant step forward," Harford said. "The top 20 international retailers account for two-thirds of all international online sales to Kiwis - and they generally already have the capability to collect GST at the time a sale is made. It would be easy for the government to require them to pay their fair share of GST."