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Overseas companies to start collecting GST on low cost products sold to Kiwis

Overseas companies will start collecting GST on low value goods sold to New Zealanders from this Sunday, and while it will likely mean a cost increase there could be a bargain to be had on Black Friday.

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But the change may open a window of opportunity for bargain hunters. Source: 1 NEWS

New Zealand is joining Australia, the United Kingdom and others in making offshore retailers that sell more than $60,000 of goods in this country per year, collect GST in the same way as Kiwi businesses.

“It’s effectively meant that New Zealand retailers have had a reverse tariff, they've had a 15% price disadvantage hoisted on them by Government tax policy,” said Retail New Zealand’s Greg Harford.

“So it's really good news for New Zealand retailers and the country as a whole that this tax loophole has been closed.”

It’s not cost effective for Customs to collect GST on low value goods at the border, so it doesn’t. Sunday’s change will put the cost on the retailer, requiring the tax be charged at point of sale, before being passed on to Inland Revenue.

So far 372 companies have signed up.

“Most of the businesses we're talking about here are big businesses, they've got scale, the ability to collect GST at the point of sale, they just need to switch it on,” Mr Harford said.

The Government expects to rake in around $300 million in the first three years, but Deloitte Tax Partner Allan Bullot said it could be higher.

“This tax is going to raise significant amounts of revenue for them.”

Deloitte works with some of the online giants like Amazon, and said while the tax may mean higher prices, it could make online shopping more straightforward.

Imports won't get caught up with some of the problems that used to happen at the border, he said, with duty and import taxes to be scrapped on low value goods, like a $400 pair of nice shoes.

And Black Friday sales are likely to fall into the "changeover" period, where GST won’t be charged at point of purchase on Friday, ahead of the changes, and Customs won’t charge taxes at the border when the goods enter the country following the changes next week.

“It could well be the best day ever to buy online,” Mr Bullot said.

Senior lecturer in retail marketing at Massey University, John Murray, foresees some confusion but believes the change will ultimately be accepted by both overseas companies and consumers.

“There will be a little bit of learning required as we start to get used to the new GST model, the so-called 'Amazon tax' that's being introduced.”