Trade deal 'involves cut to GST threshold'

TAXING: Lowering the GST threshold on internet shopping could mean more letters like these.
Fairfax NZ

TAXING: Lowering the GST threshold on internet shopping could mean more letters like these.

Online shopping could become more expensive if the GST-free threshold on foreign purchases is cut as part of an international trade agreement.

The threshold under which Kiwis can buy items from overseas websites free of GST could be cut substantially from $400 to US$200 (NZ$269) under the proposed Trans-Pacific Partnership (TPP) trade agreement, a United States journal believes.

Inside US Trade said US trade negotiators had been pushing for a US$200 tax-free threshold on international shopping as part of the negotiations on the TPP agreement, to which New Zealand is a party.

The journal said the issue might have already been settled, reporting that negotiations on the section of the proposed TPP agreement that dealt with customs provisions had already been completed.

New Zealand's Foreign Affairs and Trade Ministry would not comment.

Inside US Trade said US negotiators had wanted a US$200 threshold on physical goods in order to safeguard the interests of US courier companies such as UPS and FedEx but faced opposition from countries, including Mexico.

A US$200 threshold would represent a reduction in New Zealand, where most goods costing less than $400, including shipping, can be imported tax-free. But it would represent an increase in many countries that are party to the TPP talks, such as Canada and Mexico.

Retail New Zealand spokesman Greg Harford said a US$200 threshold would be unlikely to find favour with domestic retailers and the association believed it would be practical to lower the threshold much further, to about $25.

A US$200 threshold "would be an improvement on $400 but it would not create a level playing field", he said.

The New Zealand Initiative think tank has meanwhile warned that New Zealand could lose out overall if countries all began requiring companies to collect GST on digital services they exported such as streamed and downloaded music, television programmes, games and software.

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That was because other countries' sales tax regimes were usually much more complicated than New Zealand's, it said.

NZ Initiative research head Eric Crampton said: "A few years ago, the state of Wisconsin issued a 1437 word memo on which ice-cream sandwiches are taxable. Exporting is already daunting enough for a lot of small New Zealand firms without having to navigate thousands of complicated tax regimes.

"I am really not convinced that we do the country a service by entering into any deal requiring New Zealand firms to collect sales taxes on behalf of thousands of American taxing jurisdictions, each with different and complicated rules, in exchange for American firms remitting GST to the New Zealand government."

Revenue Minister Todd McClay last week asked Inland Revenue officials to report back on the measures other countries had already taken to try to charge sales tax on digital imports. The department is also working alongside the Organisation for Economic Co-operation and Development, which is considering an international response to the issue.

 - Stuff

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