‘What is GST?’ is a question that many companies in New Zealand may ask themselves at some point. The answer is critical for every New Zealand business looking to sell products or services. The Inland Revenue Department levies the Products and Services Tax (GST) on the purchase price of goods and services.
Any New Zealand firm registered for GST or sold items that must include GST will have to include GST in the price of their goods or services. In October 2010, the Goods and Services Tax (GST) rate was increased from 12.5% to 15%. This article provides an overview of the impact of this change on small New Zealand businesses. You may read more about GST in New Zealand here.
GST Threshold
Taxpayers who earn more than $60,000 qualify for GST. Put another way. You need to register for GST if your firm generates taxable activity worth more than $60,000 per year or if you anticipate doing so during the following calendar year.
Note that there’s no GST paid to sell items donated to charity. Rent, penalty interest, and other financial services are exempt from GST. As soon as your firm has been GST-registered, you must begin charging GST on all of your products and services and regularly file a GST return with the IRD, as per your specified schedule.
GST On Import And Export
Businesses outside New Zealand may be required to charge and pay GST on items supplied to New Zealand customers, depending on the product’s value and if it falls under the threshold. Overseas enterprises selling low-value items to New Zealand customers may have to register, collect, and remit GST starting December 1, 2019.
On the other hand, taxes on products and services exported from New Zealand are zero percent. So, as a result, you don’t have to pay GST on exported items since they are ‘zero-rated.’ The items must be shipped and bought by a foreign buyer, which you should show.
Businesses outside New Zealand may be required to charge and pay GST on items supplied to New Zealand customers, depending on the product’s value and if it falls under the threshold. Overseas enterprises selling low-value items to New Zealand customers may have to register, collect, and remit GST starting December 1, 2019.
GST Effect On Small Business Based On Studies
A survey showed that most small and medium businesses expect sales to be hit by the Goods and Services Tax rise. Most firms believe that the increase will have a minor impact on their sales.
Prior studies on tax compliance typically focused on individuals and income tax. This study aims to extend the scope of this research by examining the various types of tax compliance that taxpayers may have failed to report.
The study interviewed over 200 small business taxpayers in the New Zealand economy. It was focused on those who work in the primary and trades sectors. It also aims to determine if there is a difference in the attitudes and norms of different taxpayers regarding tax compliance.
There’s also evidence that many taxpayers in the primary and trades sectors keep different mental accounts for GST. They also cited the cost of compliance as a burden. Taxpayers in the primary and businesses sectors displayed mixed feelings about their interactions with the Inland Revenue. On the other hand, those in the GST sector were more positive about their dealings with the agency.
How Economists View GST And Its Impact
Is the interest rate of GST too high? Some economic analysts urge the New Zealand government to decrease the GST rate to 10% as a short-term solution to the country’s financial woes.
Reducing the GST will help lower-income families spend more money, which might help the economy grow again. They believed it would send the correct message to New Zealanders, namely that they must spend money.
While some believed that it was unclear how this would address the issue at hand, consumers and businesses aren’t being impacted by rising prices right now. They might be amid a financial shortage and a crisis of confidence.
In other words, cutting the GST may not going to help. Benefiting from it will be spread out across a large number of companies, as opposed to the few at danger at present. Preserving employment and preventing company failures are the immediate concerns that need to concentrate on. Providing things like salary subsidies, paid sick leave, and lines of credit is a better way to do this.
Takeaway
An analysis of the impact of the higher GST rate on business compliance costs found that it may impact the rate change on their business relationship and transactions and were particularly hard hit by the higher GST rate.
Despite the steps taken to address the various issues related to the business taxation of goods and services, little has been done to compare the compliance costs of these businesses to those of large corporations.
