Undervalued imports lose millions in tax
More than one in four Kiwis are undervaluing imported goods to avoid GST, Customs Minister Maurice Williamson says.
Mr Williamson said yesterday that during a six-month operation where Customs examined 2562 express-delivery low-value imports, more than a quarter were undervalued in an effort to evade the tax.
"High-value goods are being mis-described and undervalued to speed up border clearance and evade duty," he said.
"This is an unacceptable abuse of the express pathway."
Customs' express-lane was designed to clear low-value goods when the revenue owed was less than $60, and therefore not collected.
Mr Williamson said while the false price was being declared by the dispatcher outside New Zealand's jurisdiction, those importing goods also knew it was tax evasion.
It was in the interests of those importing packages to undervalue the goods, not those dispatching them, he said.
A total of $158,000 in lost revenue had been collected as a result of the operation.
The Government could be losing millions of dollars of revenue a year on undervalued items, he said.
While wilful tax avoidance was illegal, there had not been any prosecutions following the operation.
"In the end it's a very difficult issue to get on top of."
Customs was working with industry players, including New Zealand Post, FedEx and DHL, to make them aware of their obligations to stop fraud.
Customs and Inland Revenue were due to release soon a discussion document into whether the minimum cost of imported items that incurred GST should be changed.
At present, GST is usually levied only on overseas consumer purchases worth more than $400 because of the cost of collection.
However, a lower threshold could mean more people trying to avoid tax and higher compliance costs, Mr Williamson said. "It ruins it for everybody else."
During the operation, everything from expensive electronics to aircraft parts were coming in under the guise of being low-value goods, he said.
Both commercial and privately imported goods were being undervalued.
In one example, electronic parts imported from the United States, which were declared at $326, were discovered to have a value of $24,304.
Customs acting group manager of revenue and assurance Simon Williamson, who oversaw the operation, said it was triggered after a smaller investigation into 1000 packages.
Customs targeted packages based on a weight-to-value ratio as well as companies and individuals that were blacklisted in its intelligence system, he said.
It was like trying to find a needle in a haystack. Customs dealt with more than four million low-value freight imports each year.
The goods are cleared electronically to make it faster and easier for importers and freight companies.
Simon Williamson said the offending was happening at the dispatch end and most people in New Zealand had no intention of defrauding the government.
The importers were involved in the activity, but they were not the ones giving the false information, he said.
Once a problem was identified, the onus was on the freight forwarding companies to collect the lost revenue, he said.
"We don't want to corrupt the trade and people's ability to buy online."
- © Fairfax NZ News
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