The fact the Prime Minister is raising this now is significant. The OECD is working on a multilateral solution for governments losing tax revenue from digital commerce. The next reporting deadline is towards the end of 2015. The question is, will Mr Key wait that long? He doesn’t say.
Other countries have already moved on this. The EC requires certain overseas companies to register and collect VAT on products sold to consumers in the EC. South Africa has done the same and there are others.
The likely multilateral solution will focus on enforcement in my view. Legislating to require non-resident companies to register for GST here is an important first step and most companies will comply. However, many may not and the Government will need a mechanism to enforce the law. That’s where an OECD wide solution could be helpful.
Prime Minister Key is suggesting some mechanism to block digital retailers from access to OECD consumers if they do not comply with the VAT/ GST law.
Clearly this issue is now well and truly in the Government’s spotlight. NZ retailers have been pushing for something to be done for some time now and will be watching developments closely.
Barrister, Director and Consultant specialising in tax, family enterprise governance and succession, helping start ups and entrepreneurial enterprises grow safely and international expert on value added tax policy and implementation.