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Govt expects '75% compliance' on foreign GST it can't police

Watch - The government has officially announced that foreign companies will be asked to pay GST on goods sold online to New Zealanders from October next year.

Small Business and Revenue Minister Stuart Nash and Customs Minister Meka Whaitiri spoke at Unity Books in Wellington.

Watch the announcement:

GST was applied to digital services from offshore such as Netflix in 2016.

Mr Nash said the move announced today, which would take force on 1 October 2019, would extend it to goods sold online from offshore as well.

However, the tax will essentially be voluntary, with Small Business minister Stuart Nash saying there was no way for the government to effectively police it.

He said the government was expecting "about 75 percent compliance".

Ms Whaitiri said the move would change how GST was collected, so that instead of applying at the border it would apply at the moment of sale.

"And in turn, buyers of these goods will no longer pay Customs tariffs or border security and biosecurity fees. This will simplify compliance and administration costs at the border," she said.

The system would not change for goods over $400, however.

Prime Minister Jacinda Ardern signalled the move on Morning Report today, saying the government would be announcing "fairer" GST rules.

Finance Minister Grant Robertson in November had to rein in expectations the tax change would be imposed early on, after Mr Nash initially said the government would be making the move.

It comes ahead of the Labour government's first Budget to be announced on 17 May.

Australia had also been planning to collect tax on low-value online goods from last July, but delayed implementation to July this year as it struggled to work out the practicalities. Switzerland is set to introduce one on 1 January next year, and the EU is looking at a similar system.

In the UK and Canada, the equivalent of New Zealand's $400 limit is much lower.


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