24th October, 2018
The vast majority of online sales will soon attract GST, levelling the playing field for NZ retailers.
The government has announced plans to alter the way GST is collected on online purchases, with the new laws to come into effect on 1 October, 2019.
From that time, purchases made online between $400 and $1000 will no longer attract customs duty and levies, marginally reducing the cost burden on NZ consumers at these price points.
At the same time, consumers will now only need to pay GST of 15 percent on low-value (less than $400) goods purchased online, with retailers expected to collect the tax during the transaction process.
The news is set to be a boon to NZ retailers, with the average online shopping basket coming to $144 – a basket that will now attract GST.
Buy NZ Made Executive Director Ryan Jennings recently spoke with The Pulse to voice the organisation’s support for the concept.
“The Buy New Zealand Made Campaign is in favour of a law that helps put Kiwi businesses on a level playing field within international businesses,” said Jennings. “This could be achieved by collecting GST at the time of purchase by major global retailing platforms on behalf of the IRD.
“As long as this compliance process didn’t deter platforms from restricting their offering to Kiwis including business owners, who can also benefit from open trade and purchasing choice.”
Last week, Revenue Minister Stuart Nash confirmed the new laws will be aimed at imported goods valued at or below $1000, and that customs still have responsibility for collecting GST on goods valued more than $1000.
“There are about 26,000 small businesses in New Zealand employing more than 62,000 people in the retail sector.
“Many are in competition with foreign firms who sell exactly the same product into our market without collecting GST,” said Nash.
Responding to the announcement, Retail NZ’s GM for Public Affairs, Greg Harford said that local retailers and wholesale business owners are likely to celebrate the news.
“New Zealand retailers, which employ Kiwis and deliver economic benefit for New Zealand, have long suffered a significant competitive disadvantage as a direct result of government tax policy,” said Harford.
“Kiwi retailers have been paying GST since 1986, while foreign firms selling into New Zealand have long had a free-ride from the New Zealand taxpayer.”
Retail NZ, which has been campaigning on this issue for years, believes this decision will create a more level playing field, as consumers will see less difference in local versus international prices.
“The proposal is in line with international practice,” he said. “For example, Kiwi retailers selling into Australia already have to pay Australian GST, and low thresholds apply in most other markets.
“While the solution is not perfect, it is a substantive step forward at delivering a level playing field for New Zealand businesses.”
According to Harford, more than 75 percent of sales from foreign websites make around $60,000 in sales each year, with the average basket size coming to around $144.
As a result, a wide majority of online sales will attract the 15 percent GST rate once the new laws come into effect.
Retailers hoping for good news regarding the doubling up of Customs Duties and GST on items above $1000 will have to continue waiting, as the new rules only target low-value imports.
Nevertheless, the resulting change in consumer perspective will surely be welcomed by domestic retailers and wholesalers alike.