Offshore suppliers of low-valued imported goods to online shoppers in New Zealand will next year be required to register, collect and return New Zealand GST.
The new rules will apply to goods valued at or below $400 supplied to New Zealand suppliers. Tariffs and border cost recovery charges will be removed from goods valued at or below $400.The announcement by the Government has come as no surprise. Work was started by the previous National government and the Jacinda Ardern-led coalition picked up the work and moved it along quickly.
Importantly, offshore suppliers will be required to register when their total supplies of goods and services to New Zealand exceed $60,000 in a 12-month period.
Large retailers such as Amazon and China’s Alibaba will likely follow the rules and register. But there is a loophole for niche products sold to collectors and whose turnover in sales does not exceed $60,000.
There is much detail to be worked through but the main one is surely what happens if an overseas seller does not register and does not collect or pay the GST?
If the Government is serious about collecting the GST on the imported goods, Customs may be forced to hold the goods at the border until the issue has been sorted. That will cause undue and unnecessary frustration to shoppers used to clicking and buying.
The Tax Working Group chaired by former Labour finance minister Sir Michael Cullen says the two concerns with an offshore supplier registration system are potential non-compliance with the rules by offshore suppliers and the potential for not returning the revenue collected.
Officials advised the group of the recent success of the application of the model for cross-border services, providing an encouraging sign.
For the option to be a success, the group considers further consultation on the detail and implementation of an offshore-supply registration model is essential.
National retailers and business representatives are applauding the move, saying it evens out an unfair trading environment. Retailers complying with the laws of the land are at a price disadvantage when goods sourced internationally are GST-exempt. However, there are reasons other than price for Kiwis to shop online. One of them is choice. Rare or difficult items to find in New Zealand can often be found at the click of a mouse.
New Zealand retailers are also at a disadvantage because of the size of the local population. Buying power can be diminished by the lack of order size.
There is still a long time to wait for the new rules to start. Retailers can use this opportunity to not sit back and wait for the Government to help their revenue. They can continue working on how to best attract people back into the bricks and mortar stores.
Most of New Zealand’s major chain retailers have an online presence and encourage their customers to either click and collect or have their purchases delivered for a small delivery cost.
Time-poor people are becoming increasingly used to having their groceries packed and delivered or having sales items delivered. Shopping can be a recreation activity for people with time on their hands but increasingly, malls are being built with facilities other than just retail outlets. Movie theatres, restaurants and food courts are becoming part of the overall experience.
Retailers are being naive if they think bringing in the 15% GST on low-value goods will be a salve to their problems. If a purchaser wants a clothing item from overseas priced at $50, they may well be prepared to spend the extra $7.50 of GST to have it delivered unless there is a more attractive proposition locally.
Choice is what attracts shoppers in all sectors — from hardware to apparel. Retailers have 17 months to convince Kiwi shoppers they have what it takes to keep their tills ringing.
