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Are you ready for the 1st of April 2014?

Change to tax law is as certain as tax itself.

The 1st of April is a favourite of governments around the world for ushering in tax changes.

Here’s a snippet of some changes that are coming into force in GST, VAT and other indirect taxes on 1 April:

Albania – Supplies of medical services and medicines will be exempt from VAT, alcohol and tobacco excise taxes will rise and energy drinks will become subject to excise tax.

Cook Islands – The standard VAT rate will increase from 12.5% to 15% and import charges on some foodstuffs will reduce to zero.

France – CO2 content will become the basis for calculating excise taxes on energy products.

Japan – The rate of Consumption Tax will increase from 5% to 8%.

Lithuania – Excise duty on alcohol products will increase.

New Zealand – Non-residents will be able to claim refunds of GST for New Zealand business expenses under an enhanced registration system.

South Africa – Foreign suppliers of electronic services to residents in South Africa will have to register for VAT and charge South African VAT.

So, a busy day for indirect tax changes. Don’t be fooled!

The South African measure is especially interesting and deserves more comment in a separate post.

Iain

 

 

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GST and online shopping – is there a cure?

The NZ Government has delayed the Customs / IRD report on GST and online trading to allow the issue to be considered as part of the wider review of how global corporates are taxed. I think the merger of the issues was unavoidable. They are closely linked and the ultimate solution will be multilateral.

Nevertheless we’ve just come through another peak retail season with shoppers confirming their increasing appetite for internet purchases. Senior politicians have taken notice of the amount of GST being lost to the government and local retailers wonder why their overseas competitors continue to have this advantage over them.

As I see it, there are two interim solutions:
1. Remove the low value import threshold.
2. Introduce a domestic low value threshold for GST purposes.

Each has its own challenges and each means more compliance costs for someone. The first option appeals more however because it is consistent with perserving the integrity of our existing GST system.

cheers

Iain

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12 GST thoughts of Christmas

12 GST thoughts of Christmas:

1. There’s no GST on gifts (so Santa is probably not GST registered).
2. GST registered businesses can claim back the GST on gifts they buy for staff, suppliers and customers.
3. If you buy someone a gift voucher for Christmas it’s quite likely the IRD won’t get any GST until the person redeems it.
4. If the person you gave the voucher to loses it the IRD might never get any GST.
5. On Boxing Day when you go to the shop to return the present you don’t want the retailer will be able to get a refund of GST from the IRD provided they credit you for the return.
6. However, the retailer will have to pay GST if you use the credit to buy something else.
7. The government gets a double whammy of GST when you buy alcohol for your Christmas festivities or petrol for that family road trip (because GST applies to excise taxes on alcohol and fuel).
8. If you order an expensive gift online from overseas for someone in New Zealand and have it delivered directly to them you may be giving them a GST bill because chances are they’ll have to pay GST on the value of the present before they can pick it up from Customs.
9. Businesses are given an automatic extension of time to file their November GST return so they don’t have to file it on 28 December.
10. GST registered businesses with 31 December balance dates which make exempt supplies may have to come back early from their holidays so they can calculate their annual GST adjustment due on 28 January.
11. If you’re booking an overseas holiday and have to take a domestic flight to get to your departure airport it’s best to book both flights together if you want to save the GST on the domestic flight.
12. There’s no GST on gifts but if someone gives you something expensive while overseas you might have to pay GST when you bring it back with you.

Happy Christmas everyone

Iain

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At least it’s a start

More pressure from retailers for the Government to remove the iow value import threshold for goods. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11171599

This isn’t going to go away. It’s part of the wider debate on how to tax the digital economy. I think faster progress is required. Other countries including the EU, US, South Africa and most of the OECD already tax digital goods and services, softward, books, movies, music, hosting services and more. New Zealand does not unless the purchaser acquires more than $60,000 worth in a 12 month period.
New Zealand has moved a step closer with a new GST registration system for non-residents whcih comes into force in April 2014. If changes are made to the “place of supply” rules for services and enforcement issues are dealt with there’s a lot of revenue potential for the Government. The cost of administering a reduction in the low value import threshold for goods will seem tiny in comparison.

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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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At least it’s a start

There’s a lot of chatter about South Africa’s proposed law requiring foreign businesses to charge VAT on sales of digital products to South African residents. If passed the law will cover things like music, videos, software and games sold on line.

At the moment, like many countries, South Africa’s VAT system struggles to cope with on line sales. New Zealand is the same. There are reverse charge rules but these just don’t work effectively for this sort of thing.

So the proposed answer is to force foreign on line businesses to register for VAT in South Africa if they receive funds from South African bank accounts for on line sales or they sell to South African residents.

A lot of people have rightly pointed to the practical difficulties enforcing a law like this. There’s no question they are pretty challenging. But frankly I can’t see countries like South Africa giving up just because it’s difficult. This is a growing issue and it’s a major inequality in all VAT systems. It needs to be dealt with.

The US has just passed an Act covering the same issue in relation to their State sales taxes. It’s called the Marketplace Fairness Act of 2013.

The EU has also legislated in this area, and yes, it’s obviously a little less challenging when it’s within one economic union.

The debate in Australia is increasing as it is in New Zealand. We now know the NZ IRD are looking at the issue.

Technology and more inter-governmental cooperation on tax matters will make it easier so I think it’s a fair bet we’ll see attempts made to reign this one in sooner rather than later.

Iain