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Government closes GST loophole for offshore companies

02 May 18

The Government has closed a loophole that gives offshore companies an advantage by not requiring them to collect GST on all goods sold to local consumers.

Revenue and Small Business Minister Stuart Nash says domestic businesses have long called for greater fairness in the treatment of low-value goods from offshore retailers.

“Foreign companies are not required to collect GST on goods under $400,” he explains.

“Small businesses such as bookshops have convincingly argued they are penalised by a system which is badly out of date.”

“It’s particularly difficult for very small shops outside the main centres. Some Kiwi firms are doubly disadvantaged, as online retailers who sell into Australia will soon pay GST to the Australian Tax Office.”

Customs Minister Meka Whaitiri also weighs in on the debate, stating: “GST has always been payable on low-value goods but it is not cost effective for Customs to collect it when it is $60 or less.”

“We propose making offshore suppliers collect GST on low value goods at the moment of sale, and in turn, buyers of these goods will no longer pay Customs tariffs or border security and biosecurity fees.”

Whaitiri says this will simplify compliance and administration costs at the border.

"This supports the focus of Customs to make cross-border transactions easier without compromising the need to keep out illicit substances and materials.”

Nash adds, “GST has been collected on services and digital products from offshore, such as streamed movies and music, since 2016. This extends that to goods.”

Nash acknowledges the work of the previous Government which agreed to a GST Discussion Document in July 2017 and thanks former Revenue Minister Judith Collins who “got the ball rolling on this”.

“It is a pleasure to complete her work. This is an example of an issue with cross party support.”

Nash concludes by thanking the Tax Working Group for its advice to proceed with the proposal.

“It is consistent with our GST framework, which is broad-based, low-rate, and applies to goods and services traded across borders and consumed here.”

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