NZ businesses want GST law change as international online retailers pocket Government millions

Thursday, 6 July 2017

New Zealand clothing retailer Last Season director Jeremy Mould says his company's revenue could have grown more than 300 per cent a year if its international competitors were liable to pay a goods tax on low cost items.

The Government could be missing out on at least $140 million a year as tax laws continue to drag online shopping trends, a goods and services tax (GST) expert says.

Deloitte partner Allan Bullot said New Zealand's clothing, cosmetic, toy and book stores were 'screaming blue murder' at international online shopping giants nabbing their customers with cheaper prices.

New Zealand consumers are spending online to get cheaper deals but the Government is not capitalising on all of their incoming purchases.

It was a hot political topic and shoppers should expect their online purchases of low cost goods to be taxed soon after this year's election, Bullot said.

Bullot said the law had not kept up with shoppers' shift to buy online as the Goods and Services Tax Act 1985 and Customs regulations still let online purchases of items that do not attract duty tax, cross the border and arrive on doorsteps with no added 15 per cent GST cost.

* Buyers set to pay GST on overseas online services by Christmas**

Most items do not attract duty tax and are only subject to GST if its value is more than NZ$400.

In most cases clothing and footwear attracts a 10 per cent Customs duty tax payable by the consumer at the border, unless that combined GST and duty payment falls below a threshold of $60.

Bullot said the Government had been talking about GST law reform for years.

A Government discussion document from 2015 titled GST: Cross-border services, intangibles and goods stated that New Zealander's volume of online purchases was making GST collection unfair and inefficient.

In October last year an online services tax was introduced, forcing offshore digital service providers to pay the same GST as New Zealand based competitors, bumping up prices on the likes of Netflix.

Bullot said it had proved successful with the majority of international digital firms registering with New Zealand's Inland Revenue (IRD) to comply with the new rule.

Comparing a renewed goods tax law to a ripped fishing net, Bullot said the Government needed to throw something into online retailers' water to catch at least some of the money slipping through the system.

He said the Government needed to acknowledge that a new law would not be perfect, but it had to act now to limit the competition for New Zealand store owners.

New Zealand based online clothing retailer Last Season had more than 308 per cent revenue growth from 2014 to 2015, but its director Jeremy Mould said if there was a goods tax on all offshore online clothing purchases coming into New Zealand, his company could have seen more success.

He said Last Season was created to make it easier for Kiwis to buy cheap international clothing as fashion seasons changed, but no GST on cheap goods kept his company at a disadvantage to global players like the United Kingdom's Asos and Australia's The Iconic and Surfstitch.

Mould said his company had to pay GST on the clothing it imported and sold online to New Zealanders, so offshore retailers should too.

'It does feel to me that people are short cutting and bypassing [taxes].'

He said shoppers buying clothes online for a better deal were fostering a false sense of savings because the process to return items was more difficult if the retailer was based overseas.

A New Zealand Customs spokesperson said it was working with the IRD, the Ministry for Primary Industries and the Treasury to 'explore a range of alternative, low cost methods of collecting duty on low value goods'.

Bullot said rolling out taxing of cheap imports would be easier said than done.

It would be most effective if the extra cost was put on the price of goods by the online retailer so it would be paid by the consumer at the point of sale, not at New Zealand's border, he said.

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