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More on NZ’s low value import rules

NZ Customs is proposing to relax the low value asset threshold for imported goods. Here’s a paper they’ve prepared for Government’s consideration.

Click here.

In essence NZ Customs suggests allowing more low value goods to be imported without GST or other customs charges applying.

This is interesting timing given Australia is reviewing whether they should be tightening the rules for duty free imports to protect domestic retailers who say they are unfairly prejudiced by the ability of consumers to buy low value products from offshore internet sites like Amazon etc.

From a simplicity perspective the NZ Customs proposal is appealing. The current threshold works in an unnecessarily complicated way.

Nevertheless, as consumers make greater use of the ability to buy goods directly from overseas I can well imagine rising pressure from our retailers to remove or at least reduce the threshold here.

Iain

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Australia shines spotlight on e-tailing

The Australian Government has set up an enquiry by their Productivity Commission into online shopping and the impact on retailers.

There’ll be lessons here for New Zealand.

I think it’s difficult to contemplate an end to tactile retail therapy which so many Kiwis seem to enjoy as their weekend leisure activity of choice. However, from the work I do it’s clear e-tailing is becoming an increasingly popular way to shop. Recently I’ve seen more and more overseas businesses establish direct selling channels into New Zealand. Clothing, electronic goods, books and toys seem to be particularly popular. To some extent old-fashioned retail shops are seen as unnecessary intermediaries with consumers chosing to order directly from overseas distributors or sites like Amazon.

The Australian Government has recognised a need to examine the impact of this activity on their retailers. There’s an impact for the Government too in the form of reduced tax collections and this has prompted an accompanying campaign in Australia to ensure GST and customs duty concessions for low value imports are not being abused.

New Zealand has similar concessions which I’ve discussed before. Broadly, goods with a value of up to $400 may be imported duty and GST free. This can mean savings up to around $60 on a $400 purchase.

The outcome of the Australian enquiry will be very interesting. Even more interesting will be how the Government reacts if it concludes action is required. Surely e-tailing is here to stay which means the Government’s options for levelling the playing field (if indeed it’s necessary) may be limited. The most obvious tools in their tool box will be in the tax (read GST) and customs areas.

Have a great xmas everyone and happy shopping!

Iain

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Cloud computing tax risks

Cloud computing is predicted to become increasingly popular with businesses looking for a complete outsourcing solution to their IT needs. It allows access to computer infrastructure, software and storage (amongst other things) over the internet.

New Zealand’s Inland Revenue Department has concerns about the “storage” part of cloud services. They’ve just issued a Revenue Alert warning businesses using cloud storage services to be careful. The Department has concerns because NZ businesses are required to keep all tax records in New Zealand, unless they get specific approval not to.

According to the Department’s Alert businesses using cloud storage services should ensure their tax records are stored on data centres physically located in New Zealand or they must seek approval to hold records offshore. They point out, failure to do so is an offence which could result in a conviction and fine.

Sometimes our tax legislation struggles to keep up to date with technological advances. The Department is to be commended for alerting people to the issues with cloud computing and I’m sure officials are also looking at whether our legislation and international tax agreements need to be modernised to reflect these sorts of business practices.

Iain

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On line shopping to get more expensive?

At the moment you can buy most goods from overseas on-line and won’t have any NZ GST charged if they cost less than $400. [Note: for some items, like clothing, GST applies at less than $400.]

NZ retailers are disadvantaged by this because it encourages on-line shopping from overseas retailers.

There is a push at the moment for the Government to review the threshold and perhaps require credit card companies to collect GST on goods bought directly from overseas.

The Government hasn’t reached a decision but what’s been missing from the debate so far is the distinction between “goods” and “services”.

Physical goods like CD’s, DVD’s or hard copy books have to be imported and could be caught by this. But there’s no suggestion it will extend to digital items like e-books or music and movies which are delivered electronically.

There’s a wider issue here and looking simply at imported “goods” won’t be a complete solution.

Also, asking credit card companies to collect the GST on behalf of the Government when someone buys something from overseas online is unlikely to be a complete solution. There are other ways to pay for items bought over the internet and consumers will respond by using those alternatives, like internet banking or by purchasing “e-dollars” or vouchers).

This is a complex issue and with the likely increases in e-commerce it’s an issue GST/VAT systems around the world need to grapple with.

Iain