Another tax increase, but it won’t be happening any time soon

Enrolment for taxation

Enrolment for taxation

Goods and Services Tax is a tax on consumption in New Zealand. It ought to be imposed on all goods and services as they cross the border, but in practice, it’s not, because often the cost of collecting the tax is higher than the amount of tax that would be collected. So government sets a collection threshold, of $60. If customs duties and GST amount to more than $60, then they’ll charge you, but if it’s less, then you get away scot free.

The government is looking at changing that threshold. And in effect, that means a tax increase. For example, say that the threshold is decreased to $10 of GST and customs duties. Currently if you import books to the value of say, $200, you pay no GST or customs duties at the border. Under the reduced threshold, you would be required to pay over $30 GST before you got your books ($200 x 15% = $30). Your tax has gone from nothing, to $30.

That’s quite a tax increase. And you have to wonder why it has suddenly become a priority for our government. After all, the problem has been known about for years, and retailers have been complaining about it for years, saying that it’s unfair that they have to charge GST, but overseas suppliers don’t, creating yet more barriers to running a successful retail business in New Zealand.

It’s the money. In their discussion document released today, GST: Cross-border services, intangibles and goods, the government estimates that it’s losing about $140million a year in GST on imported goods. And that figure is set to grow by about 10% a year. That’s a lot of government revenue, especially when that long promised surplus is looking more and more like a mirage.

The thing is, it’s not going to happen any time soon. It’s expensive collecting duties and GST at the border, and Customs’ systems are not set up to deal with lots of low value goods. So here’s what government is going to do: it’s going to do some more consultation.

Changes to the de minimis threshold
3.22 …Customs has been asked to look at options for simplifying and changing the level of the threshold, with a report to Ministers later in the year. This is anticipated to be followed by public consultation.

Well, that’s certainly being on the cusp of something special. Next year. Maybe. Or the year after. Or sometime, we hope. Possibly.

The thing is, I agree that we ought to be doing something about this loophole in our GST law. When we charge 15% GST on every cheap paperback bought in a store in the country, but we don’t charge GST on books imported from overseas, unless they cost $400 or more, then there’s an inherent unfairness in the system. And we need to do something to address it. But it would be good to see some concrete plans for action, instead of yet more consultation.

In the meantime, if you’re planning to get the latest must-have nerd-joy toy from thinkgeek.com for a friend for Christmas, then you should be fine. It looks like there won’t be any extra GST at the border for quite some time yet.

This entry was posted in NZ Politics, Taxation and tagged , . Bookmark the permalink.

One Response to Another tax increase, but it won’t be happening any time soon

  1. alisonrudzki says:

    Thanks for this overview Deborah. Personally, I would like to see the Government focusing more on those major, wealthy tax dodgers first, rather than Jo Public.

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