The government’s recent introduction of a taxation bill which proposes to charge GST for online services is a hit to the pocket that won’t be popular with Joe Public, according to leading market firm Grant Thornton New Zealand.
As announced by Revenue Minister Todd McClay, the bill targets non-resident suppliers of remote services, requiring them to register and account for GST on services provided to non-GST registered customers if they are expected to exceed the GST registration threshold.
The government says remote services include the supplies of digital content such as e-books, movies, TV shows, music and online newspaper subscriptions, online supplies of games, apps, software and software maintenance and webinars or distance learning courses.
In addition, insurance services, gambling services, website design or publishing services and legal, accounting or consultancy services also make the list.
McClay claims the measures proposed in the tax bill are about “fairness and equity”, a move which Dan Lowe, Associate, Tax, Grant Thornton New Zealand questions.
“GST is a consumption tax and a significant contributor to our country’s overall tax take,” Lowe adds.
“This new bill isn’t creating a new tax, it’s simply extending an existing tax to services that didn’t exist when GST was introduced. But it’s a positive step to ensure New Zealand’s tax base is protected.”
As Lowe explains, the change was signalled earlier in the year and is already in place in the EU, Norway, Switzerland, South Korea, Japan and South Africa.
An estimated $270 million is spent annually on online services which means that more than $40 million of GST is lost each year - this is expected to increase at a rate of 10 percent per annum.
“There will be plenty of non-resident suppliers who won’t bother to comply, or may even choose not to deal with New Zealand customers, but they will be the small players,” Lowe adds.
“I also imagine there will be consumers who will try to mask their residency to bypass the GST cost.”
However, Lowe believes large operators already need to deal with this obligation and there’s going to be more uptake in other countries - Australia joins the ranks from 1 July 2017.
“These providers will collect the majority of the revenue which makes this a worthwhile initiative in New Zealand,” he adds.