Policing of GST for online shoppers
university-of-canterbury
Sat Jul 13 2013 12:00:00 GMT+1200 (New Zealand Standard Time)
Policing of GST for online shoppers
Saturday, 13 July 2013, 12:04 pm
Press Release: University of Canterbury
Policing of GST potentially the biggest issue for taxing online shoppers
July 12, 2013
Potentially the biggest issue facing a proposal to make online shoppers pay GST is policing the payments, a University of Canterbury (UC) tax expert says.
Online shoppers may have to pay GST on all goods and services bought from overseas. A joint working party has been set up by Inland Revenue and Customs to investigate collecting the GST.
UC’s Professor Adrian Sawyer says credit card companies and PayPal would potentially be fulfilling the role of intermediaries like banks to ascertain the jurisdiction of the purchaser and add GST to the purchase.
``Possibly some online sellers may be encouraged to set up as part of the web interface a feature that, from asking for the buyer's jurisdiction, GST will be added to the credit card amount. It would require initial systems reviews and potentially some audit work in the future.
``It remains to be seen is this could work as other jurisdictions are contemplating the same issue. Related to this is whether the de minimis threshold (a minimum threshold below which the tax is not applied) be lowered from $400 to say $50 that covers all purchases, as part of a move to level the playing field. Whether it can work must be a key aspect of the working party's analysis.
``Apart from enforcement, other issues are the practical implementation by the credit card companies, the honesty of purchasers as to their jurisdiction and ensuring the system integrates with what other jurisdictions may develop.’’
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At least $1 billion of goods are bought tax-free from overseas websites each year so PayPal may need to face up to its new role as an international tax collector
For PayPal to be required to do this it would require a concerted effort by many jurisdictions, including much larger jurisdictions than New Zealand, to require GST to be charged on online transactions and then paid to the relevant revenue authority. E-commerce is expected to continue to grow so the problem is not going to get smaller or go away, Professor Sawyer says.
``There is a need for creating a more level playing field for New Zealand retailers and for ensuring as far as practicable that purchases made online are treated the same for GST purposes as those undertaken by traditional through physical commerce. Without such action it may encourage some retailers to develop schemes to take advantage of this de minimis rule, such as has been attempted in the UK.
``All physical sellers should set up an online presence to increase their sales or at least preserve their current sales. However, they are not selling from overseas so there will still be GST on these transactions in New Zealand. A bigger issue is whether stores/shops seek to set up a presence overseas, say in a low tax jurisdiction, and then sell back into New Zealand and utilise the de minimis rules.’’
ends
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