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Importing costs

NZ Customs have a feature on their website called “What’s my duty?”. It’s a great tool for calculating how much GST and other charges you might be up for when you buy stuff on line.

Here it is: http://www.whatsmyduty.org.nz/

The calculator isn’t intended to be a final assessment of exactly how much you’ll have to pay. However I still recommend having a look at it. A few dollars difference in price can really affect how much you have to pay and you may find the extra charges on some items that cost just $230 make them a lot more expensive.

For example, a camera bought for just under $400 is unlikely to incur additional charges when it comes into New Zealand. But, if the camera costs $405 the additional charges could be as much as $106! That’s because you get charged GST plus a $46 transaction fee.

If you’ve bought an item of menswear for $220 you probably won’t incur any additional import charges. But if the same item costs you $230 you could end up paying an extra $107 to Customs (duty $23 + GST $38 + fees $46).

So, it pays to check.

Add to that the extra form filling you might have to do and buying from overseas can get complicated.

For example, if you’re importing a car you have to provide documentary proof it meets NZ standards for emissions, frontal impact requirements, fuel consumption, braking and a whole lot of other aspects depending on where the car comes from and how old it is. You have to pass an entry certification inspection, bio security and customs checks.

Then there are the registration fees and greenhouse gas levies, plus the GST of course.

Plenty to think about.

Iain

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Commonsense prevails: well almost

Yesterday the Australian Tax Office issued a practice statement explaining when it would overlook an incorrect GST input claim made by a business.

You can read it here

On the face of it the practice statement reeks of commonsense.

The supplier wrongly applies GST to the transaction and so over pays their GST. The recipient over claims their GST but would have been entitled to the claim anyway if the transaction was subject to GST. The ATO doesn’t have to refund the over paid GST to the supplier so they turn a blind eye to the over claimed GST by the recipient and everyone’s left where they would have been if the mistake had never been made. In the document they call it “preserving the status quo”.

I really like the way the ATO is prepared to come out and say when they will use their “powers of general administration”. Their intention is admirable: to adopt a pragmatic approach to tax administration where being overly technical would result merely in extra administration and costs without any net effect on tax collected.

In New Zealand the IRD does in practice demonstrate the same sort of common sense approach to compliance, agreeing not to go to great lengths to unwind historic wrongs if there is no net tax at stake [although not always it must be said]. What we don’t see so much of though are published statements from the IRD saying when they will turn a blind eye to past wrongs in the interests of administrative expediency.

As sensible as the ATO position seems to be though I do have a slight quibble with it. I’m not sure it’s quite as straightforward as the document suggests.

The ATO’s statement is based on an assumption that the pricing of the transaction between the supplier and recipient explicitly took GST into account. In other words, it assumes the parties turned their minds to GST and adjusted the contract price to add GST. In my experience that isn’t always the case.

Often parties contract on the basis prices include GST (and any other taxes). The price is driven by market considerations and is the agreed price regardless of whether GST applies. So, if a supplier has incorrectly treated the transaction as being subject to GST, from a contractual perspective, it would not be right for the tax authority to insist the supplier refund a GST component to the recipient. Yet that is a strong driver of the ATO’s position.

The ATO assumes the mistake made by the supplier in over paying their GST must be corrected by a refund to the supplier being passed on by the supplier to their customer. Because of that, the ATO come to the conclusion it’s administratively acceptable simply to allow the customer to keep the refund claim they wrongly made and for the ATO not to refund the over paid GST to the supplier.

In my view, if the supplier has mistakenly reduced their margin by accounting for GST on a transaction which should not have been subject to GST and the parties clearly contracted on a GST inclusive basis without turning their minds to GST, then rather than “preserving the status quo”, the ATO’s approach could well leave the supplier out of pocket and the recipient with a windfall.

Cheers

Iain