The government is indulging in "industrial strength optimism" if it thinks online retailers will begin to charge GST on low-value goods, a tax specialist says.
Photo: RNZ
The government announced yesterday that from October next year it would require overseas companies selling goods to New Zealanders to pay GST on all goods bought online.
Revenue Minister Stuart Nash noted the government would be trusting retailers to add the tax as it would be hard to enforce in overseas jurisdictions.
However, tax specialist Mark Keating said that was ridiculous, as there were too many online retailers around the world.
"That's a bit cheeky of New Zealand ... this strikes me more as the government had to do something, and at least this is something so the government can claim they're at least trying to do something."
"What the government is effectively requiring is that overseas non-resident businesses become our voluntary tax collectors."
"I know it sounds a bit trite but if the US government can't get Amazon and Google to pay the US tax I struggle to see how the New Zealand Inland Revenue will be able to beg, convince, bully overseas retailers to do its bidding."
"It's probably going to rely on a name and shame campaign to identify larger retailers who just refuse and many of those ones probably will agree to do so simply to avoid the bad publicity.
"But online purchase of goods has so many sources from so many countries and so many items it's actually going to be impossible to track."
It wasn't just intentional avoidance that would be a problem either, he said.
"Even if you wanted to co-operate, effectively the government's requiring those companies in those countries, at their own expense, to change their systems in order to accommodate IRD."
"Many of those countries will have no way of knowing New Zealand's brought in this GST charge, and Inland Revenue has no way of telling them."
Mr Keating said the system was based on the so-called 2016 "Netflix tax".
"Which effectively required large, online suppliers such as Netflix to voluntarily register for New Zealand's GST, to charge GST to customers that either self-identified as being from New Zealand or that they themselves identified as being New Zealanders.
"But with the online sales there isn't a monopoly - everyone's calling it the Amazon tax and I guess that there is going to be a lot of people that do buy from Amazon - but that's only one source."
"The theory is that they are required to register although obviously being non-residents or outside New Zealand they would be beyond the reach of Inland Revenue so there's almost nothing Inland Revenue can do to them."
He said the government's rules also needed to have penalties for New Zealanders who tried to get around the system.
Photo: VNP / Phil Smith
Mr Nash responded that the government would be targeting only those companies doing a large amount of business in New Zealand.
"One thing we need to keep in mind is you will have to send in over 60,000 worth of goods into the country in order to register for GST in the first place," he said.
"We're talking about by and large, large organisations" - Revenue and Small Business Minister Stuart Nash
He said the large companies' reputations would rely on their compliance.
"They do not like to be seen to be reneging on their tax obligations anywhere round the world so they do comply," he said.
"When we brought in the GST for online services, we've already had over 200 overseas companies register for GST here.
"We make it easy for companies to register, we work with them to make sure that they're complying with all of New Zealand's legal obligations.
"Also keep in mind our GST is a very, very easy tax. It's 15 percent, it's a flat rate, there are very very few exceptions. For most of the organisations that we're talking about this will not require a systems change in any way shape or form because they've got to collect tax in the jurisdictions they're in anyway."
New Zealand was not just relying on goodwill either.
"If it gets to the point where they have registered and they're not passing the GST on, then we are ... signatories to a number of tax treaties which allow overseas jurisdictions to actually collect tax on our behalf," he said.
Mr Nash said Inland Revenue was already well-resourced to collect the tax.