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Inland Revenue

Tax Policy

Chapter 1 – Background

1.1 Goods and Services Tax (GST) is a consumption tax on goods and services which are supplied to consumers in New Zealand by registered persons (such as businesses).

1.2 New Zealand’s GST is highly efficient and accounts for about thirty percent of tax revenues. However, specific provisions in the Goods and Services Tax Act 1985 (GST Act) need to be regularly maintained or updated in response to changing technology, business practices, jurisprudence, and other factors.

1.3 A number of issues have been identified where the legislation produces an outcome that does not reflect the underlying policy intent. These issues need to be addressed to maintain the certainty, efficiency and fairness of the tax system.

1.4 The purpose of this officials’ issues paper is to outline technical tax policy issues and provide potential policy options and, where possible, proposed solutions to these issues.

Summary of issues, options and proposals

1.5 Officials’ are seeking public feedback on the issues set out in this paper. The table summarises the issues, options and proposals.

Chapter and topic Issue Option/proposal
Chapter 2 – Tax invoice requirements Aligning GST invoicing requirements with changes in business practices and technology. Remove some of the requirements or make them more flexible.
Chapter 3 – Cryptocurrencies Cryptocurrencies have an unfavourable GST treatment compared to money or other investment products.

Exclude cryptocurrencies from GST and the financial arrangement rules.

Income tax will still apply to any profits made when cryptocurrencies are sold or traded.

Chapter 4 – Apportionment and adjustment

The apportionment and adjustment rules can be complex and difficult to apply.

In addition, in some situations they can result in under or over-taxation.

A number of different amendments to specific apportionment and adjustment rules are considered.

In addition, feedback is sought on further ways in which the rules could be simplified and improved.

Chapter 5 – Domestic legs of the international transport of goods

Courier business practices involve sub-contracting part of the journey for an international delivery to other providers.

The GST zero-rating rules for international transport do not accommodate these sub-contracting practices.

Zero-rating domestic transport services that are supplied to a non-resident transport supplier that has been contracted to provide international transport of goods to or from New Zealand.
Chapter 6 – Business conferences and staff training It is impractical for non-resident businesses to register for GST to claim a GST refund for a one-off expense of sending their staff to a conference or training course in New Zealand. Zero-rate conference and staff training services supplied to non-resident businesses.
Chapter 7 – Managed funds The GST treatment of different types of management services supplied to managed funds is complex and applies inconsistently.

Develop new rules for fund manager and investment manager services.

Several alternative options are discussed:

  1. Taxable (15% GST).
  2. Exempt financial services.
  3. Deem a percentage to be exempt (and the remainder taxable).
  4. Zero-rating or a reduced input tax credit mechanism.
Chapter 8 – Insurance pay-outs to third parties Compliance difficulties from a GST-registered third party unknowingly receiving an insurance pay-out (which they treat as compensation).

Three alternative options are discussed:

  1. Making the insurer responsible for the GST obligations.
  2. Requiring disclosure that the payment is covered by insurance.
  3. No law change but provide education and guidance.
Chapter 9 – Compulsory zero-rating of land Some situations have been identified where the current compulsory zero-rating of land rules appear to produce flawed outcomes or the timing of when the relevant provision should apply could be improved.

Clarify that section 5(23) applies to place the output tax liability on the purchaser, in cases where a vendor incorrectly zero-rates land.

Section 5(23) should apply to standard-rate the supply of land on the date that the original supply was incorrectly zero-rated.

Adjustment of second-hand goods input credit in cases where land should have been zero-rated in the taxable period in which it became apparent that the amount of input tax deducted was incorrect.

Clarify that section 20(3J), applies from the time of supply of the land.

Chapter 10 – Technical and remedial issues Other technical or remedial changes are required to various rules in the GST Act to ensure these rules work as intended.

The proposals relate to:

  • GST grouping rules.
  • Input credits on goods not physically received yet at the time the GST return is filed.
  • Second-hand goods input credits on supplies between associated persons.
  • Providing more flexibility for the Commissioner to approve the end date of a taxable period.
  • Members of non-statutory boards.
  • Right to challenge Commissioner’s decision to re-open time-barred GST returns.

1.6 Subject to submissions on this issues paper, the proposals would be included in the next suitable omnibus tax bill.

Making a submission

1.7 Submissions are invited on the options and proposals in this issues paper.

1.8 Submissions should include a brief summary of submitter’s major points and recommendations. They should also indicate whether it is acceptable for officials from Inland Revenue to contact submitters to discuss the points raised, if required.

1.9 The closing date for submissions is 9 April 2020.

1.10 Submissions can be made:

  • by email to [email protected] with “GST policy issues” in the subject line; or
  • by post to:
    GST policy issues
    C/- Deputy Commissioner, Policy and Strategy
    Inland Revenue Department
    P O Box 2198
    Wellington 6140

1.11 Submissions may be the subject of a request under the Official Information Act 1982, which may result in their publication. The withholding of responses on the grounds of privacy, or for any other reason, will be determined in accordance with that Act. If you consider that any part of your submission should properly be withheld under the Act please clearly indicate this.