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Importer Loses $764,000 GST

Import News from the Importers Institute 7 October 2000 –

An importer is substantially out of pocket as a result of bad GST legislation.

The importer cleared container loads of National Geographic magazines, individually wrapped and pre-addressed. The containers went straight from the wharf to New Zealand Post for national distribution through the postal service. The importer never took possession of the magazines. His involvement was limited to arranging Customs clearance.

He paid GST to Customs on importation and claimed it back from the
Inland Revenue Department ("IRD"). Customs had earlier advised him that he would be entitled to those claims but, in 1992, the IRD decided to query their validity. Four years later, the IRD decided to disallow all claims, on the grounds that the importer did not acquire the magazines. The importer wrote a cheque for $764,329.13.

The importer then applied to Customs for a refund of the GST paid on importation. Customs declined the refund application and the matter went to the Customs Appeal Authority. Judge Barber ruled for Customs, saying "I accept that the prepaid magazines could have been dispatched as mail, but they were not. [...] It is up to the applicant to structure its business transactions in the best light for itself. If it fails to do that, then I can only treat matters as they were done and not as they might have been done."

The Importers Institute has previously pointed out that the law on the interaction between GST and imports is riddled with inconsistencies. The idea of paying GST to one department, only to have it refunded by another, was conceived by bureaucrats in turf protection mode. As usual, someone has to pay for these bureaucratic blunders - in this case, the bill went to the former agent of National Geographic.

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