This year is about to come to an end and it's worthwhile recapping on the significant changes in the indirect taxes landscape in New Zealand. This article discusses several highlights and reflects on the fact that New Zealand is not the only country dealing with unprecedented change in the indirect taxes area. The prominence of indirect taxes is fast becoming a fashionable trend globally.
There are two standout features for 2019. First, the growth in the digital economy and online shopping is shaping much of the new indirect taxes landscape not just in New Zealand but globally as well. Second, businesses are finding the pace of change hard to cope with and are looking for change management and technology solutions to make matters easier. Use of technology also features significantly in the approach of the Revenue authorities to tax administration.
The full impact of the new Customs and Excise Act 2018 (effective 1 October 2018) was experienced during 2019. The new law was several years in the making and has given New Zealand a world class Customs framework in terms of border management and duty and excise revenue processes. The NZ Customs Service (NZCS) has worked with many businesses and logistics providers to make the transition to the new law as smooth as possible.
New Zealand's GST is widely regarded as one of the most effective and successful VAT/GST models globally. The main reasons for this are the purity and simplicity of the tax - broad base, relatively low rate (of 15%) with limited exemptions. New Zealand consumers are well accustomed to paying GST (incorporated in the price of goods and services) and Inland Revenue finds it relatively easy to collect GST - meaning that GST has been a policy and revenue administration winner for many decades. Reflecting on the effectiveness and breadth of New Zealand's GST, the expression that "GST applies to everything!" comes to mind and this was borne out once in a remark made by David Lange (former Prime Minister) who quipped: "Even drug dealers pay GST in New Zealand."
New Zealand's GST is almost 25% of the overall tax take in New Zealand (coming in at about NZ$20 billion each year), which makes it a pillar of our tax system.
“New Zealand's GST is widely regarded as one of the most effective and successful VAT/GST models globally.”
As we close 2019, one thing is clear about the new year and beyond. Innovation and embracing change will define the success of global indirect taxes reform in the future. To end, here are some visionary words from Muhammad Ali - he said that a person with no imagination has no wings. This couldn't be more true right now.