Taxman closing in on online traders

By ELLEN READ

Trade Me addicts could be in for a rude shock as the local taxman eyes the potential revenue windfall from online deals.

At least one tax expert thinks IRD enforcement of tax obligations on internet transactions is imminent - as has happened in Australia - and the department itself has not ruled out the idea.

The Australian Tax Office has intensified its efforts to collect tax from internet traders, asking the Australian arm of eBay for details of customers with sales of A$2000 a month.

EBay complied and the ATO was in business, with those named - dubbed PowerSellers - being reminded by letter of their tax obligations.

Deloitte's tax partner, Greg Haddon, said the IRD had a history of following Australia's lead, so it might be only a matter of time before similar inquiries were made here with sites such as Trade Me.

And, if implemented, collections could go back seven years.

The local thresholds are annual turnover of $40,000 (which means the seller must be GST-registered) or anyone who sells personal property and is in the business of buying and selling that property, or who acquired the property for resale.

IRD's group manager field delivery Martin Scott said the IRD was always scanning the business environment for areas that might present a revenue risk and had been monitoring the growth in e-retail and online trading.

"We have not set up a formal process in the same vein that the ATO has. But if we become concerned there is a significant revenue risk from 'under the table' e-trading there are a number of actions we can take to gather intelligence on those involved."

Mr Scott said online traders were subject to the same tax laws as people who sold through traditional outlets and he urged anyone who was unsure of their obligations or who wanted to make a voluntary disclosure to contact the department.

There were no hard-and-fast rules to determining a person's status but tests included the number of trades and amount of time spent on electronic auctions.

"You don't actually even have to be in business. If you bought, say, a car with the intention of selling it, then any profit you make would be taxable," Mr Haddon said.

The IRD was not strict in enforcing this. "It's hard because it's hard to find them and to confirm."

Government indications that it intended to target the cash economy - in particular tradespeople doing cash jobs - added to his case.

Trade Me boss Sam Morgan said the majority of users were casual, but some professionals were making a living from the site.

Trade Me directs customers to an IRD website outlining their tax obligations if it receives queries.

Trading place

Trade Me is a website where people buy and sell goods.

It was set up more than five years ago by then 23-year-old university drop-out Sam Morgan.

He said at the start of this year he expected New Zealanders to undertake 20 million online auctions this year - more than three times last year's figure.

Trade Me topped the Deloitte/unlimited Fast 50 awards index as the fastest-growing company of 2004.

IRD