IRD News

GST loophole closed to offshore companies

Posted 01 May 2018

Credit: iStock by Getty Images

The Government is to close a loophole that gives offshore companies an advantage by not requiring them to collect GST on all goods sold to local consumers.

“Domestic businesses have long called for greater fairness in the treatment of low-value goods from offshore retailers,” says Revenue and Small Business Minister Stuart Nash. “Foreign companies are not required to collect GST on goods under $400. We are now calling for feedback on a system to register these suppliers for GST.”

“There are more than 26,000 small businesses employing more than 62,000 people in the retail sector. Many are in competition with foreign firms who enjoy this tax break. Local firms compete on an uneven playing field. Large multinationals sell exactly the same product into our market without collecting GST.

“Small businesses such as bookshops have convincingly argued they are penalised by a system which is badly out of date. It’s particularly difficult for very small shops outside the main centres. Some Kiwi firms are doubly disadvantaged, as online retailers who sell into Australia will soon pay GST to the Australian Tax Office,” Mr Nash says.

“GST has always been payable on low-value goods but it is not cost effective for Customs to collect it when it is $60 or less,” says Customs Minister Meka Whaitiri.

“GST is collected at the border for goods over $400. We propose making offshore suppliers collect GST on low value goods at the moment of sale, and in turn, buyers of these goods will no longer pay Customs tariffs or border security and biosecurity fees. This will simplify compliance and administration costs at the border. This supports the focus of Customs to make cross-border transactions easier without compromising the need to keep out illicit substances and materials,” says Ms Whaitiri.

“GST has been collected on services and digital products from offshore, such as streamed movies and music, since 2016. This extends that to goods,” says Mr Nash.

“I acknowledge the work of the previous Government which agreed to a GST Discussion Document in July 2017. It forms the basis of the document released today. 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.

“I also thank the Tax Working Group for its advice to proceed with the proposal. It is consistent with our GST framework, which is broad-based, low-rate, and applies to goods and services traded across borders and consumed here,” Mr Nash says.