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Fines possible for VPN use

Paul Brislen, Editor. 17 November 2015, 7:34 am

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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David Lane 17 November 2015, 9:53 am

This'll be an interesting one to watch... Seems unlikely that (by definition) any authority would be able to prove the "consumption" of a foreign paid service through a VPN due to jurisdictional issues...

Ian Apperley 19 November 2015, 12:29 pm

It's just rhetoric and this whole idea that we can save the economy by collecting GST on online purchases in an effort to buy local is ridiculous.

Consider that there are about 5,000 Cloud services in the wild now and most of them are offshore from minnows to monsters. Are they all going to implement this?

I very much doubt it.

Am I going to be punished by using a VPN AND consuming those services?

Clearly the policy makers have never heard of stealth VPN as well, virtually impossible to detect with a 60 second rotating IP address...


Dave Cowman 13 December 2015, 10:21 am

I'd be prepared to pay GST if need be on my overseas access. Where do I pay it? Who calculates it at what time and at what exchange rate etc. etc.

Camille Cowley 20 January 2016, 4:31 pm

This is very similar to the EU tax changes and also will suffer the same flaws. E.g. you are French with a French bank account but work with a British company and are on holiday. You purchase a physical product and want it shipped to the British address however the IP and nationality info conflict. Or you want to use a cloud business service in your holiday location, the billing address, IP and payment details all conflict. So in essence this is just a junk data collection. Businesses will do a best effort to collect data that will definitely not provide a way to confirm a users location of use for a service or the physical end point for a product. Really it just creates a mess. However once the data is collected there is no onus on a business to deny service. For a lot of people the case is non of the data will ever match country correctly. Buying from a work network, using services overseas, posting to family. That would be a large customer base to cut off. Hence it is a feel good exercise that will cost companies money to implement but produce little actual confirmation in return. It shows poor understanding of technology and would cost more money to implement & police worldwide in the long run. So best effort is get the large subscription/product distribution companies to follow it & police them. The rest is left to the wind.. or to the Cayman Islands. I forget which is fashionable now.

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