Dividing overseas online retailers into “good” and “bad” suppliers is likely following Customs Department action to curb the evasion of duty and GST at New Zealand’s borders.
Online shopping has long been in the government’s sights and consumers will likely face delays and extra import duties in future if they buy goods from “bad” online traders.
And from next year, offshore suppliers can register for GST and meet their New Zealand tax obligations with less red tape than at present.
The battle lines are already drawn.
This week Customs Minister Maurice Williamson revealed that in a recent swoop, more than a quarter of express parcels were under-valued or mis-described to speed up border clearance and evade duty.
Of 2562 consignments, 733 were above the low-value threshold and $158,000 in lost revenue was collected.
Williamson said if the operation was anything to go by, “the loss of revenue adds up to millions of dollars a year”.
Customs’ express lane is designed for clearing low-value goods with less than $60 duty owing. This is not collected.
Some overseas sellers are helping their customers evade duty by falsifying customs declarations. Anecdotal information suggests these practices are on the rise. It didn’t take us long to find an overseas website telling its clients: “We will do our best to assist you to minimize/avoid customs charges. For example, the minimum value we could declare is US$130. We also could mark the items as ‘gifts’ to reduce the possibility of import charges.”
Williamson says everything from expensive electronics to aircraft parts are sneaking into New Zealand under the concessionary express consignment scheme.
He cites the example of electronic parts imported from the US in April with a declared value of $326 when, in fact, the real value was $24,304.
With New Zealand retailers pressuring the government to remove the low value import concession entirely, Customs is likely to continue its sweeps. It warns it has the power to seize goods and even prosecute consumers in some circumstances.
This type of enforcement isn’t cheap but, as long as New Zealand offers a concession for low value imports, it will be necessary to stem the rising tide of abuse and lost revenue. It’s also important to ensure local retailers are not driven out of business but dishonest online suppliers.
In time, these suppliers will consider increasing their online prices and complying with their New Zealand tax obligations if they wish to continue selling to Kiwi consumers.
Iain Blakeley is EY’s lead partner for indirect tax and Paul Smith an Executive Director specializing in customs and international trade.