GST moves increase NZ's international competitive standings
August 23 2011
Government's GST moves welcomed to increase NZ's international competitive standings
The release today of a discussion document from the IRD on GST and transactions with non-resident businesses has been welcomed by Deloitte tax partner Allan Bullot.
The GST cross-border neutrality proposals announced by Revenue Minister Peter Dunne could go a long way to reducing GST problems faced by non-resident businesses wanting to trade with New Zealand.
“There has been increase in situations recently where foreign businesses have ended up paying too much GST when they have been seeking to do business in New Zealand,” Mr Bullot says.
“Frequently it is the New Zealand based businesses that ultimately bear that increased GST cost at an economic level, so the proposed changes to the GST laws should increase the competitive standing of New Zealand businesses. GST should not be a cost in most business to business transactions, as the tax is designed to only be borne in final sense by private consumers.
“In a nutshell, IRD is looking to make it easier for foreign businesses to claim back New Zealand GST in broader circumstances than currently exist. This would be by allowing foreign businesses to claim back GST under an ‘enhanced registration’ process. IRD has noted that one of the benefits of such a change would be a closer alignment of New Zealand’s GST treatment in this area to that of Australia.”
There are a number of anti-avoidance issues that are described to ensure that expenditure which is essentially private in nature would still remain subject to New Zealand GST.
As with any change in tax legislation, the final details and associated compliance costs will be critical, but the initial proposals certainly deserve further consideration. New Zealand companies transacting with foreign business that currently have excessive GST costs should ensure they inform the foreign businesses of these proposed changes, as submissions close on 7 October 2011.