18 Aug 2015

Buyers set to pay GST on online services

9:43 am on 18 August 2015

The days of buying tax-free goods and services online are set to come to an end.

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The Government is currently losing an estimated $180 million of revenue to online purchases. Photo: RNZ / Diego Opatowski

The Government is considering its options over applying GST to goods and services that are bought online or from overseas.

It is currently losing an estimated $180 million of revenue to online purchases, a figure that is rising every year, and plans to extend GST to all online purchases to patch up the ever-widening hole in revenue.

Prime Minister John Key said GST on some online purchases could be in place by Christmas.

"I think you should have to pay for online services, and in fact there's about 12 jurisdictions around the world that do that, including Europe, so it's a well-trodden path and it actually works," said Mr Key.

"In principle, if you buy, for instance, Sky TV and pay for that in New Zealand, you pay GST for the Sky services that you get, so why shouldn't you pay if you take Netflix from offshore, or something like that."

Mr Key said charging GST on services like iTunes and Netflix would be able to be put in place quickly, but taxing goods coming over the border would be a bit more challenging.

"The Government's trying to balance up the need to be both fair to existing retailers who have bricks and mortar on the ground, the fact that we've got a hole in our revenue accounts as more and more purchases are happening online, but also reflecting the fact that consumers both for convenience, and not necessarily price, do want to purchase online."

Labour and the Green Party were cautiously supporting the move, but said the devil would be in the detail.

Green finance spokesperson Julie-Anne Genter said the principle was a good one.

"Because it is fairer for New Zealand businesses that they are not having to compete with online retailers who don't have to pay GST, but we will need to see the detail in the discussion document to see what options and thresholds are going to be optimal."

Before the last election, the Prime Minister promised there would be no new taxes, and he remains adamant that charging GST for online purchases was not a new tax.

But Labour revenue spokesperson Clayton Cosgrove said that was a strange way of looking at it.

"Because if something isn't taxed and then it becomes taxed, I think the average person would see it as a new tax."

Ms Genter said it was probably a little misleading and opportunistic for the Prime Minister to claim the Government would never introduce new taxes.

"It was pretty obvious that there is a need for reform in the tax structures here in New Zealand and a need for additional revenue, so it's a question of Mr Key saying what he thought voters wanted to hear so they would vote for him, and then having to pragmatically implement policy while being in Government."

Internet NZ chief executive Jordan Carter said transactions online and "down at the local shop" should be treated the same, as a general principle.

But given the small scale of retail in New Zealand, he said, it was not clear a 15 percent mark up on some items purchased from overseas would change the way people shopped.

"The kind of anecdotal information we have is that it's the choices that people have that really drives their decision."

Retail New Zealand chief executive Mark Johnston said the tax should not be difficult to implement given the systems already in place for other businesses to pay GST.

"The likes of Amazon in particular there's no reason that they can't be registered for GST. They already do it in other jurisdictions around the world so it's relatively straight forward to do."

Mr Johnston said the introduction of the tax would give the Government a much needed cash injection

A discussion document on the plans to charge GST for online purchasing is likely to be released by Wednesday.