10th May 2018

New Zealand’s proposed so-called ‘Amazon Tax’ falls squarely in line with the enactment in 2016 of its ‘Netflix Tax’, as part of a modernisation effort to help adapt the country’s tax system to the realities of present-day commerce. The Amazon Tax would apply to importation of low-value goods from abroad which have previously gone untaxed.

Current estimates put the value of such untaxed imports at $533 million per year as of 2016, with an increase to $850 million likely by 2021 as the e-commerce industry continues to grow. The new law is not yet set in stone, but it is aiming for a 1st October 2019 start date. If left unchanged, non-resident suppliers that deliver more than $60,000 per year in goods to New Zealand consumers will be required to register for, and pay, GST on all low-value (<NZ$400) items shipped. Items valued at over NZ$400 will be taxed by customs, but will not be affected by the newly proposed law.

Apart from the gains in tax revenue that the new law would allow, the effort is also aimed at fixing a fairness and competition gap between brick-and-mortar stores, which have always needed to pay GST, and online retailers, which have been able to slip past ordinary taxation law. The previously enacted Netflix Tax had a similar effect in leveling the playing field for electronic goods such as music, films and e-books.

Australia will begin collecting taxes in July under a similar law, with thousands of foreign businesses soon to be forced to pay taxes on sales made via e-commerce with Australian consumers as the recipients. An estimated 150 Kiwi businesses will need to pay this 10% tax on exports to Australian consumers, ending the period of tax-free sales for them.

Inland Revenue has also entered the cryptocurrency fray, announcing that holders of Bitcoin or other alternative currencies will be required to pay any relevant taxes on them, just as though they were standard currencies. Tax rules for foreign exchange, on the other hand, are not applicable where cryptocurrency trading is concerned.

A new tax on petrol in Auckland has also been proposed by the government, which mentioned a target of 10 to 14 cents per litre to be added to current levels of taxation. The idea is not without controversy, however, particularly as ordinary consumers are likely to end up paying for the increase, either directly or through higher prices on the products they buy. Still, the Greater Wellington Regional Council has declared its intention to pass a similar increase in petrol taxation if the Auckland bill is passed, and other regions may well join in.

Other new taxes are still being debated. The new insurance tax, for example, had originally been scheduled to come into effect on 1st January 2019. A recent bill has pushed back the implementation of the new tax to 1st July 2019, giving insurers an extra 6 months to continue conducting business without factoring in the new tax.

Amid all the changes and proposed amendments to current tax law, New Zealand has been rated compliant by the OECD Global Forum for its thorough and transparent management of taxation affairs.