Every parcel coming into NZ by post is screened by x-ray or sniffer dog but not every parcel has its value declaration vetted. Photo / Andrew Warner
Every parcel coming into NZ by post is screened by x-ray or sniffer dog but not every parcel has its value declaration vetted. Photo / Andrew Warner
Suppliers and importers who falsify the value of their goods and avoid GST at the border are gaining an unfair advantage over local retailers.
This issue is "prolific", and organisations affected by the usually overseas-based opportunists selling to New Zealanders on local marketplaces say it is an issue Customs shouldbe proactively cracking down on.
GST has been levied at the border since 1986, when it was introduced.
Greg Harford, chief executive of Retail NZ, said there was a "sizeable number" of suppliers who were not paying 15 per cent GST by creating a false invoice for a product. Declaring the value of the import as lower than cost price.
The act was "outright fraud", and Customs needed to make sure these people were not "defrauding the system", Harford said.
About 10 million of those were small, low-value goods.
If we're going to stop a consignment and check anything, we've got to have a good reason to and an understanding of what we're looking for. Otherwise, the volumes would overwhelm us.
Every parcel coming into the country through the postal stream is screened either by x-ray or detector dogs. But not every parcel coming in has its value declaration vetted.
Richard Bargh, group manager for revenue and assurance at Customs, said any physical checks for accurate value declarations usually came about through industry tip-offs.
As was the case where Customs recently discovered electronic equipment shipped to New Zealand by a Hong Kong supplier which had an incorrect value declaration, in an attempt to avoid GST.
"If we're going to stop a consignment and check anything, we've got to have a good reason to and an understanding of what we're looking for. Otherwise, the volumes would overwhelm us," Bargh told the Herald.
But that's what retail industry analysts are concerned about. That too many illicit importers and suppliers are getting away with not paying GST at the border as Customs is stretched, unable to vet enough orders.
Customs says just 2 per cent of all parcels that come into this country are found to be non-compliant, though most due to misdescribing goods or not declaring items rather than incorrect value declaration.
Chris Wilkinson, general manager of First Retail Group, said New Zealand's systems to ensure GST avoidance was not happening were "overwhelmed".
"As the volume of goods has increased, infrastructure and resources haven't ...
"The Government has been remiss in not foreseeing and provisioning for this when other countries could clearly see the revenue leakage and commercial impact."
Around 27 million parcels passed through New Zealand's border through the mail last year. Photo / Getty Images
Bargh rejects claims that GST avoidance on imports was a widespread issue.
While the responsibility for enforcing tax law sat with Customs and Inland Revenue, online marketplaces should also take responsibility and thoroughly vet sellers, Harford said.
"Anyone selling online via a reputable marketplace should be a legitimate business that's paying their employees fairly, paying tax, that isn't bringing unsafe product into the market."
Wilkinson said: "Trade Me should be giving greater scrutiny to these offshore sellers that could be clearly identified through the categories they trade in, scale of listings and unverified commitments of managing tax on behalf of buyers.
"The company says it takes fraud seriously — this type of activity is on a grand scale — yet the organisation conveniently looks the other way."
Stuart McLean, Trade Me head of marketplace, said the company relied on Customs to enforce GST payment at the border of its sellers.
"We will act if they raise concerns with us," McLean said in a statement in response to whether the platform should be given greater scrutiny to offshore sellers.
The marketplace had already banned one seller, UDS, from its site after its parcels were held by Customs for not paying GST. It was also making additional tweaks to its analysis systems, he said.
Incoming GST legislation which comes into effect December 1 requiring foreign websites to charge GST at the checkout for orders coming into New Zealand is expected to help ensure compliance with tax obligations.
