As of 1 October, overseas companies selling goods to Kiwi customers will have to start collecting GST on all products valued under $1,000, under a new law expected to be passed.
Under current rules, GST is not typically collected on imported items under the value of $400, but the new laws have been under debate since the growth of the e-commerce industry.
This leaves online shoppers wondering which items are actually worth ordering from foreign websites such as Amazon, Alibaba and eBay.
At the moment, for example, if a consumer bought books through Amazon for $60 including shipping, the duty fees would be waived. However, if they bought a $621 Coach Charlie Bucket handbag from eBay, including the $86 shipping fee from the US to New Zealand, they would be stung with a bunch of other costs.
The total bill would have added costs including an estimated $26.75 in duty, $84.26 for the 15% GST, $12.90 for GST on freight, and $52.67 in entry fees.
That is an extra $176.58 to the cost after buying the bag with shipping fees, making the total fee $797.58. The same bag bought from the Coach store in New Zealand costs $770, so the consumer would actually save $27.58 by shopping domestically, which is exactly the point of the GST.
The aim of the proposed tax hike is to protect local business, by charging foreign companies the same threshold as domestic businesses.
Revenue Minister Stuart Nash said that many New Zealand small businesses were in competition with foreign firms who sold exactly the same products into our market without collecting GST.
“Domestic businesses have long called for greater fairness in the treatment of low-value goods from offshore retailers,” Nash said.
“With steady growth in online shopping from offshore suppliers, a significant amount of tax revenue is also being lost.
“Mostly though, it’s a matter of fairness so the sooner we get this the better. This measure aims to help level the playing field and improve the integrity of our tax system.”
Some retail giants, however, believe the move would reduce New Zealanders access to a competitive market.
Amazon’s Matt Levey, who is the shopping giant’s local public policy head, recently wrote a joint letter to Parliament’s Finance and Expenditure Select Committee along with other large retailers such as eBay and Alibaba.
Levey wrote that Amazon was “concerned that an unworkable GST collection model will harm NZ consumers by potentially reducing access to competitively priced goods from overseas marketplaces,” as reported in Stuff.co.nz.
However, the increased taxes don’t seem to bother all avid online shoppers. Westpac customer Camellia Yang is devoted to sites such as Shopbop, Farfetch, Ssense, Tmall and brand official websites.
“I use these websites for items that I cannot find locally in New Zealand or for specific sizes, colours, and styles that aren’t available here,” Yang said.
“I mostly buy clothing, shoes, and sometimes gifts online and I enjoy using these sites so much to get exactly what I want that I’ll continue to use them even if taxes increase,” she added.
The debate of increased GST for foreign companies will be discussed again on 11 June in Parliament before the final decision is made.
New Zealand Customs say they encourage anyone buying goods from overseas to check their online duty estimator to learn about costs and also prohibited and restricted items before shopping online.