MHK Chartered Accountants Comment On "Netflix Tax"

New Zealand's so-called "Netflix tax" has passed its second reading, with a final reading expected to go through implementing this unchanged very shortly, and going live 1st October 2016. Ian Malcolm, Managing Director of MHK Chartered Accountants, warns that this will affect quite a number of imports of intangibles, possibly putting up prices. “However, this only places those overseas suppliers on the same footing as local NZ businesses, who do have to account for GST on their sales”, he comments.

Under current law, intangible goods such as services, media or software purchased from an overseas online retailer escape the current 15% GST tax. Assuming the bill goes through unaltered, which is most likely by the time this is published, it will force overseas service suppliers, above a threshold of $60,000 revenue per year in New Zealand, having to register for GST here.  Although not yet passed, at the last vote, both National and Labour voted for the change, so this coming live seems inevitable.

This may well affect larger suppliers such as Netflix and iTunes, Amazon and other suppliers of e-books, Pandora and Spotify, as well as a myriad of other players in the market.  It may even affect Skype and similar services, as well as offshore booking or marketing businesses. Malcolm comments, “It's going to mostly affect the larger companies who sell software or intangible services in New Zealand because they've kept the $60,000 threshold, the same as NZ businesses". That excludes very small players in the market of seldom-purchased eg software from being caught but it means that there will be a smaller number of large players that will be forced to register to charge GST to New Zealand consumers.

“That’s great for the New Zealand taxpayers overall, the amount of GST collected overall will be greater than before with that being paid by either the overseas business directly, or in some cases, the consumer, just like all other goods & services from GST registered businesses in New Zealand.  Business taxpayers will be unaffected as they can claim the GST back," Malcolm says. "So it will really only affect non-GST registered purchasers.  In many cases we expect the foreign supplier to simply keep their prices unchanged to remain competitive in the NZ market, many will already have maximised their prices, so all that will happen is that their excess profits will be eroded”.

Although the OECD has been working through a set of guidelines for GST on goods and services from overseas online retailers, there had been concern the process was taking too long, which has stimulated action such as this from local government. The IRD is expected to issue guidance on registration, and how it will be monitoring and enforce overseas providers.

Malcolm comments, “Once this is effective, either a lower threshold of the value of products being imported, or a similar tax on large suppliers of goods such as Amazon, may be reconsidered”.

MHK Chartered Accountants specialise in legally minimising all types of taxation obligations and offer a no-obligation discussion free of charge.  For more information on this, and MHK Chartered Accountants, please go to http://aucklandaccountant.net.nz.