The big tax news over the last week was the release of the Governments proposal for GST on low value imported items.

Only a discussion document has been released so far and the final result may differ from what is currently proposed.

Much of the coverage and commentary in the Media has focused on the advantage no GST has given non-resident businesses over New Zealand businesses. In reality, this will only be effective where the sole cause of price difference was GST. Where goods are truly cheaper from a non-resident retailer this will remain. 

While the change will cause some increase in cost to consumers it is important to remember that academically GST is a tax on consumption, not on business and the consumer should therefore be paying their fair share of tax. 

It is also important to note that the rules will only impact goods which were previously under the de-minimis meaning the maximum increase in cost to consumer would be $60. Higher value goods will continue to be subject to GST via customs. 

One of the issues that lead to the original exemption where total taxes and levies collected was less than $60 (about $400 gross) was the compliance cost in collecting these amounts. The current proposal pushed these costs onto the non-resident businesses. The difficulty in enforcing this makes these changes largely ones of voluntary compliance.

Due to recent changes brought in by the anti-money laundering legislation and some of the additional requirements during registration, the process of getting an IRD number for a non-resident has become very long winded, cumbersome and at times costly. The discussion document suggests a more simplified registration system like the remote services rules will apply and where the Government are going to rely on voluntary compliance this must surely be available in order to make compliance as easy and cost free as possible