NZ Budget 2015: A signal about GST on overseas online purchases

Budget 2015 signals that New Zealand is looking at following Australia's recent lead in taxing services purchased online from offshore sellers. Low-value goods purchased online will also be looked at.

"New Zealand can't ignore this issue any longer so it's encouraging to see Budget 2015 confirms this is a key focus area on the tax policy work programme - the digital economy has a profound impact on GST,”  PwC Partner and GST specialist Eugen Trombitas says.

"Making up around 30% of the Government's tax take, GST is a tax on consumption and when this consumption is taking place in New Zealand, GST should be charged. New Zealand retailers and businesses have been insisting on a level playing field and there's a danger we could fall behind the international pace and best practice if nothing is done soon.  

"Another key consideration is there needs to be a specific solution for goods and another specific solution for services," says Mr Trombitas.

-Ends-

Notes to editors: 

Goods – our Government could consider a range of options and may consider lowering the threshold but perhaps not eliminating it. The Government can change the focus from minimum duty/taxes to a minimum value of goods as this would be easier to administer.

Unless some other efficient way of collecting GST at the border is found (for example, taxing foreign sellers), it is likely that NZ Customs will need to collect more GST at the border. Additional resources will be required.

Services – the Government could consider a specific foreign seller regime for digital services (eg Norway, South Africa and from 2017 Australia) or broaden the GST Act to apply to any services sold to New Zealand consumers and collect GST from foreign sellers through the standard GST returns system.

Changes announced in the Australian Federal Budget on 12 May 2015.

Goods:

1. Online purchase of low value goods (current threshold AUD$1,000) - no changes announced. 

Services (note: start date is 1 July 2017):

1. GST will apply to online purchases of digital products from 1 July 2017 (these are services for GST eg content of streaming services, e books, app downloads, iTunes, Google Play).
2. Not only digital services but other services purchased online will be caught (eg consultancy, professional services).
3. Seen as issue of fairness, level playing field - as domestic businesses would have to account for GST.
4. Estimated extra revenue AUD$350 million plus over 4 years.
5. Follows work of OECD and takes lead from similar rules enacted in EU, Norway, South Africa, Japan, Korea.
6. Compliance matters being worked through, expected that foreign sellers will collect and remit Aus GST.