A bill has been introduced to Parliament which would require businesses to add GST to late fees.
Traditionally, late payment fees have not been subject to GST because they have not been considered part of the price of a good or service.
The Inland Revenue Department says the current laws lack clarity and some businesses are paying GST on late fees.
A GST partner at PricewaterhouseCoopers, Eugen Trombitas, is critical of the proposed change, saying consumers get neither a good nor a service from the payment of late fees. He is concerned the change will expand GST into a cashflow tax.
However Revenue Minister Peter Dunner says the Inland Revenue Department has treated late fees as GST-payable for some time, and the need for clarification has arisen following a recent legal challenge.
He says Inland Revnue is concerned that under current law businesses will restructure themselves to avoid paying GST.
The bill will go through its first reading before the house rises for the general election.
