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At present most goods and services bought and consumed in New Zealand are subject to goods and services tax (GST). This includes goods and services imported for consumption in New Zealand. The New Zealand Customs Service is currently responsible for collecting GST on imported goods at the border. However because of the administrative cost, GST is not currently collected on imported goods attracting less than $60 in GST or other levies.
The advent of the internet and the growth of online shopping has in recent times seen a rapid increase in sales of imported low-value goods. This has consequences for the tax base if consumers are shifting their buying from domestic to offshore retailers. It also places domestic retailers at an unfair disadvantage. This is a problem faced by tax authorities around the world.
This public consultation document seeks submissions on the design of a system that would require offshore suppliers to collect GST on low-value goods supplied to New Zealand consumers. Offshore suppliers would therefore be required to register for GST with Inland Revenue just as New Zealand domestic retailers are. The offshore supplier registration system would apply to goods valued at or below $400 and is intended to address the non-collection of GST on imported goods below the current de minimis.
Implementing an offshore supplier registration system for collecting GST on low-value imported goods is consistent with recent changes New Zealand has made to deal with the non-collection of GST on cross-border services and intangibles. The cross-border rules, which applied from 1 October 2016, require suppliers of cross-border services and intangibles (including e-books, digital downloads and software) to register and return GST when they supply services and intangibles to New Zealand-resident consumers.
The system outlined in this consultation document is also broadly in line with recent international developments. In Australia a similar approach will apply to all imported goods valued at or below AU$1,000 supplied to Australian consumers from 1 July 2018. The European Commission indicated in December 2016 that European Union (EU) Member States would use a variant of an offshore supplier registration system to collect value-added tax (VAT) on low-value imported goods from outside the EU by 2021. The EU also currently uses an offshore supplier registration model to collect VAT on intra-EU cross-border supplies of goods.