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​Kiwi SMBS “deserve better” as Govt drags feet on GST

​Kiwi SMBS “deserve better” as Govt drags feet on GST

While this a positive step in fixing a loophole, “as usual, National hasn’t done it properly.”

National is still dragging its feet on applying GST to products bought from overseas and not giving small business a fair go, despite being in government for seven years.

That’s the damning verdict of Labour’s Revenue spokesperson Clayton Cosgrove, in response to the government’s recent introduction of a taxation bill which proposes to charge GST for online services.

Unveiled by Revenue Minister Todd McClay, National believe the measures proposed are about “fairness and equity.”

“The best Todd McClay can come up with is releasing another discussion document on GST on overseas products in six months’ time,” Cosgrove claims.

“Small businesses in New Zealand deserve better than that.”

For McClay however, the measures are about creating a “level playing field” for collecting GST and putting New Zealand businesses and jobs ahead of the interests of overseas suppliers.

So much so that McClay brands them an “important first step” in the government’s efforts to deal with increasing volumes of online services and other intangibles purchased from overseas suppliers that should, under New Zealand’s tax rules, be subject to GST.

“GST should apply to all consumption that occurs in New Zealand,” he claims. “This is what makes our GST system fair, efficient and simple.”

“The growth of online digital and overseas services means the volume of services on which GST is not collected is an increasing challenge - for the government in terms of the GST revenue foregone, and as a matter of fairness for New Zealand suppliers of services and intangibles who must account for GST in their pricing structures.”

McClay says the proposed measures will apply GST to cross-border “remote” services and intangibles supplied by offshore suppliers (including e-books, music, videos, and software purchased from offshore websites) to New Zealand-resident consumers, by requiring the offshore supplier to register and return GST on these supplies.

“Charging GST on remote services is only one step,” Cosgrove counters. “There aren’t many Kiwi businesses competing with Apple iTunes or even Netflix.

“National’s approach looks like a tax grab rather than an attempt to level the playing field. National needs to stand up for Main Street businesses, not just online ones.”

According to National, non-resident suppliers will be required to register and return GST when their supplies of remote services to New Zealand residents exceed $60,000 in a 12 month period.

McClay says the proposed measures are intended to maintain the broad base of New Zealand’s GST system and to create a level playing field between domestic and overseas suppliers of online services and intangibles.

“The proposed changes would broadly follow the OECD’s recommended guidelines, as well as the rules that apply in other jurisdictions, such as Member States of the European Union, Norway, South Korea, Japan, Switzerland and South Africa,” he adds.

Cosgrove believes that while this a positive step in fixing a loophole, “as usual, National hasn’t done it properly.”

“Todd McClay has thrown up his hands and said collecting GST on real products is too hard,” Cosgrove adds.

“He needs to make a better effort to help traditional Kiwi small businesses as well as online services.”

Australia has announced plans to introduce similar rules that will apply from 1 July 2017.

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