No easy fix to recouping GST

Last updated 13:48 20/02/2013
Taxing Times
Taxing Times is a weekly column that looks at various aspects of tax and money management.

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OPINION: GST is a tax on consumption in New Zealand. Therefore, generally, imports into New Zealand are subject to GST as the goods are consumed in New Zealand, writes Murray McClennan in Taxing Times.

Various retail and sector groups have been lobbying against the inequity of New Zealand consumers shopping on line and importing goods but not having to pay GST, or duty, on goods of less than $400. Estimates of the annual level of forgone GST are as high as $150 million.

The $400 threshold is set as an administrative concession. The presumption is that the cost of collecting GST on such imports makes it uneconomic.

The following have been suggested as ways the Government could collect GST on all online purchases from overseas: Ask overseas suppliers to charge and collect GST on sales to New Zealand and then remit the GST to IRD. This is unlikely as neither IRD nor the Government can require an overseas supplier to do this. Compel the credit and debit card firms to add GST on such purchases and remit the GST to IRD. Again this is unlikely as the credit card firms would want to pass on the associated cost. Operate a self-assessment policy. If you buy goods from overseas for less than $400, you voluntarily pay the requisite amount of GST to IRD. There may be a few honest souls who would do this, but I suspect that they would be in a distinct minority.

I believe that there is no simple solution. Other countries with VAT or GST also have the same problem. The apparent consensus is that it is a leakage from the tax base and that for now that is acceptable.

» Murray McClennan is director of Tax Central Ltd, a specialist tax consulting firm.

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