OFFSHORE GST MOVE “NOT A SILVER BULLET”

By Wares June 01, 2018 Industry news

On the first of May the Government confirmed it would be closing a loophole that gives offshore companies an advantage by not requiring them to collect GST on all goods sold to local consumers.

Currently, offshore companies are not required to collect GST on goods under $400 but the Government is now calling for feedback on a system to register these suppliers for GST.

GST has always been payable on sub-$400 goods bought offshore but it has traditionally not been considered cost effective for Customs to collect it.

Now, from October 2019, the Government is proposing to make offshore suppliers collect GST on these low value goods at the moment of sale, so in turn, buyers of these goods will no longer pay Customs tariffs or border security and biosecurity fees.

Offshore retailers will have to register and collect GST if their total annual sales to New Zealand consumers exceeds $60,000, the same threshold that applies to domestic businesses and to offshore suppliers of cross-border services.

The BNZ and Marketview estimate Kiwi online spending with overseas retailers is worth $4.2 billion, or just over 7.5% of total retail sales, and “continuing to rise”.

It’s noteworthy too that Australia will have an offshore supplier registration model for collecting GST on low-value imported goods from 1 July 2018.

Local industry reaction can be summarised by Greg Harford at Retail NZ’s comment that the move “isn’t a silver bullet for the sector, but it does mean that Kiwi retailers can now focus on delivering great customer experiences, without suffering a competitive disadvantage.”

Marketview’s Stephen Bridle agrees in broad principal: “While GST on online purchases helps to level the playing field – it alone is not the answer. The change will not impact the range or convenience on offer, a main draw card of online shopping, and challenge for local bricks and mortar stores.”

Instead, he says, to keep those dollars at home, Kiwi retailers need to step up their game: “If bars, cafes and restaurants can do it, then why can’t retailers?

“We so often hear of retailers crying wolf at the ‘Amazon effect’ stealing their customers, but only mutterings of what they are doing to keep them in their stores, and away from their computers.

“As a country we have a proud history of innovation, and I would love to see this ethos reflected in a more dynamic retail environment. Our booming hospitality scene shows we have the talent and creativity, we just need to replicate it in the retail environment in order to take on those online ‘giants’ beating down our doors.”

Submissions on the New Zealand proposals are due by 29 June 2018.

The discussion document can be found here.

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