Fines possible for VPN use
The announcement that the government will indeed introduce GST on some digital goods has somewhat overshadowed news that those caught using a Virtual Private Network (VPN) could face penalties of up to $25,000.
In a press release, revenue minister Todd McClay claims the changes proposed in the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill are about fairness and equity.
"It is about creating a level playing field for collecting GST and putting New Zealand businesses and jobs ahead of the interests of overseas suppliers", says McClay.
"GST should apply to all consumption that occurs in New Zealand. This is what makes our GST system fair, efficient and simple."
While neither the press release or the accompanying question and answer document address the issue of VPNs directly, McClay is quoted in several media outlets as saying those using VPNs "to evade GST costs" would face fines. However, such rules would not apply if the customer was using a VPN to access geo-blocked content not available here in New Zealand, which begs the question how will the authorities be able to tell the difference.
InternetNZ's chief executive Jordan Carter also raises the question of determining how a customer is a New Zealand resident.
"We strongly advised the Government that using IP addresses as a means for implementing these measures is technically and logically flawed," says Carter.
"It's like determining where someone lives based on their city - and sometimes even less accurate than that."
The minister's Q&A document says offshore suppliers will be required to use "two non-conflicting pieces of commercially available evidence (for example, a billing address and the country code of their mobile phone SIM card)" to determine where the customer is based.
What this means for the NZ Post YouShop service, which provides an international billing and delivery address for New Zealanders wanting to buy goods that aren't typically shipped to New Zealand, remains unexplored.
The government will also review the collection of GST on imported goods valued at below $400. Currently such imports do not attract GST on the basis that it's more costly to collect than the tax revenue will bring in.
The new bill is expected to be enacted in mid 2016 with the new GST rules coming into effect by October next year.
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