Online shoppers could face tax bill

Online shoppers could be stung with tax on overseas purchases if Government plans go ahead.

Inland Revenue and Customs have set up a joint working party to see whether GST could be levied on overseas purchases worth less than $400.

Customs Minister Maurice Williamson said the initiative followed the explosion in online shopping and concerns that retailers were having to compete with overseas web businesses on an uneven playing field.

In previously unreported comments, former revenue minister Peter Dunne told Parliament's finance and expenditure select committee that the Treasury was also involved and that the Government expected to put out a paper with options for public consideration after advice from officials was finalised next month or in September.

Williamson would not confirm that time frame after appearing before the foreign affairs, defence and trade select committee today, saying the work would take as long as it took.

He indicated that one of the options the Government would consider would be to ask credit card companies to levy GST on overseas purchases made by consumers by adding the tax to such items when they appeared on customers' credit card bills.

He was not sure whether credit card issuers would be prepared to co-operate.

He said consumers might be able to evade GST by shopping on the internet using overseas payment intermediaries such as Paypal or by setting up bank accounts overseas.

At present, GST is usually levied only on overseas consumer purchases worth more than $400 because of the cost of collection.

A lower "de minimus" applies to some goods that still attract duty, such as jewellery and clothes. Overseas merchants can help consumers evade those charges, even when they should apply, by marking up goods as low-cost samples.

Shipments with a value higher than the de minimus also attract a flat-rate import entry transaction fee of $38.07. That fee will rise to $46.89 at the end of the month when Customs is due to launch the $89 million first tranche of its new computer system, the Joint Border Management System (JBMS).

Williamson indicated that that fee might not apply to all purchases if the de minimus was lowered as consumers might not wear paying such a high fee "on a pair of sunglasses worth $22".

The first JBMS tranche is three months late and $14m over its $75m budget, but Customs officials said the computer project had only a "miniscule" chance of failure and they hoped the governance of the project could become a model for other major public sector information technology initiatives.

Williamson said early triallists, such as Cargowise, Freightways and Mondiale, which had helped fine-tune JBMS, had expressed "delight" with the system.

Customs would continue to run its ageing Cusmod computer system for 18 months so that importers and exporters could switch back to the old system if they had any issues with JBMS performance.

If JBMS failed, he would "be living in the Bahamas within a week", he joked to MPs.