WELLINGTON: Doubts are emerging about how efficient cutting the threshold for paying GST on foreign products will be if the current clumsy collection process through Customs is relied upon.
Crowe Horwarth tax advisory managing principal Scott Mason told media yesterday he agreed the approach outlined by Prime Minister John Key made sense from both economic and tax perspectives.
Mr Key said the threshold for paying GST on foreign products online could be cut to $20 or even zero.
If New Zealand followed Australia’s lead in changing tax rules for imported goods, it was likely to set similar limits.
Australia has the highest threshold for imported goods in the OECD at $A1000. New Zealand’s limit is $400.
Mr Mason said lowering the threshold would ensure a better environment for retailers in New Zealand and would protect the New Zealand tax base as more New Zealanders bypassed GST by purchasing goods – especially books and clothes – online from overseas.
However, the reason for the current threshold was about efficiency and compliance costs.
If GST was going to be levied on a $20 purchase from the United States, the collection process became critical.
”We would be disappointed if the current clumsy collection process via Customs was relied upon, especially with the handling fee currently charged.
”Another $38 on top of a $20 purchase just doesn’t make sense.”
An efficient, electronic means of collection should be introduced, without any fees, he said.
One suggestion would require foreign websites to register for GST in New Zealand.
That might work for some, but for many businesses around the world, New Zealand was such a small market the foreign sites possibly would not bother, leaving New Zealand consumers both confused and possibly exposed to the former collection processes and costs.
An alternative Mr Mason would like to see considered was building a mechanism for the collection of GST into the credit card system for New Zealand credit cards.
That way, the process for collecting GST could occur at time of transaction, on a seamless basis.
