The “Amazon tax”

Smarter solutions

Recent announcements that the Government is to close a loophole that gives offshore companies an advantage by not requiring them to collect GST on all goods sold to local consumers, has been met with enthusiasm by those with businesses in the New Zealand retail sector.

Dubbed by many to be the “Amazon tax”, offshore retailers would be required to register and collect GST if their total sales to New Zealand consumers exceed NZ$60,000 per annum. This is the same threshold that applies to domestic businesses and to offshore suppliers of cross-border services.

Kiwi shoppers are no doubt less than thrilled however, in the pursuit of fairness and a level retail playing field, the May 1st announcement is a glimmer of light at the end of a long retail tunnel. The changes would take effect from 1 October 2019.

As it currently stands, foreign companies selling directly to New Zealand shoppers are not required to collect GST on goods under $400. GST is collected at the border for goods over $400.

Revenue and Small Business Minister Stuart Nash said “domestic businesses have long called for greater fairness in the treatment of low-value goods from offshore retailers.”

Nash went on to say: “There are more than 26,000 small businesses employing more than 62,000 people in the retail sector. Many are in competition with foreign firms who enjoy this tax break.

“Smaller retailers, especially those who operate outside large shopping centres, compete on an uneven playing field. Large multinationals sell exactly the same product into our market without collecting GST.”

New Zealand’s existing GST policy is based on the principle that goods and services are subject to GST when they are consumed in New Zealand. All domestic retailers have GST added to the price tag of their goods so the proposed measures will help to restore balance.

Because GST will be charged at the point of sale when the value of the goods is $400 or less, in some cases goods could actually be cheaper. This is due to the removal of Customs tariffs, border security fees and biosecurity cost recovery charges. There is no change to the tax treatment of goods valued above $400, where the current process for collecting GST and tariff duty at the border will continue.

Greg Harford, Retail NZ’s General Manager for Public Affairs, said “GST is supposed to be a universal tax on consumption in New Zealand, but that has been undermined by the steady growth of online shopping and the rise of foreign websites selling into New Zealand.

“This has seriously impacted New Zealand retail businesses for a long time.”

Harford applauds the move to apply the “Amazon tax”.

He went on to say: “Retail is a tough business. To be successful, retailers need to offer great products, great prices and an outstanding customer experience across both digital and bricks and mortar channels.”

Submissions on the government’s proposals are due by 29 June 2018 and a discussion document can be found at: http://taxpolicy.ird.govt.nz/


Read more market insights from Workplace

Subscribe to receive the latest commercial news and insights from Bayleys Workplace