New Zealand joins Australia with review of GST on foreign internet purchases

Fri 4th Oct 2013

New Zealand is to review the exemption from its Goods & Sales Tax (GST) on online purchases by consumers from foreign websites.  Currently, there is an exemption of NZD 400 per transaction from GST and duties.  It is estimated that New Zealand is losing NZD 175m per annum because of the tax loophole.

Australia is undergoing a similar review as its threshold for charging Australian GST is AUD 1,000 per transaction.

Lost GST revenues on e-commerce

The current low value goods GST threshold means New Zealand GST does not need to be charged sales to the final consumer for the above threshold.  As the internet grows (including new, digitally delivered goods such as ebooks), and global retailers such as Amazon look to sell and source goods from regional service hubs, countries like New Zealand and Australia are losing out on consumption tax revenues.

In addition, giving foreign retailers an effective tax subsidy directly disadvantages domestic retailers – both offline and online.

Until recently, both countries viewed the threshold as a necessary concession as the administrative burden of requiring foreign companies to register as non-resident traders.  However, the forgone revenues and unfair competition is now tipping the balance.  This compares with the EU VAT on distance selling regime.

The New Zealand tax office plans to issue draft proposals on a new mechanism by early November 2013.



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