Customs (Levies and Other Matters) Amendment Bill

Good evening, members. When we suspended for the dinner break, we were just about to start Part 3. Part 3 is the debate on clauses 16 and 17, Goods and Services Tax Act 1985. The question is that Part 3 stand part.

Madam Chair, thank you for the call. I would like to ask the Minister of Customs questions in terms of Part 3, which amends the Goods and Services Tax Act of 1985 and it is supposed to have refunds that are fairer for people who return imported goods.

There are two main changes that I can see that Part 3 does. It extends the time frame for GST refund claims so that importers, including those who are individuals consumers who import goods, will now have up to 12 months to re-export those goods and claim a GST refund, instead of the current very short window of two months. My question for the Minister is: why was the original GST refund window only two months, and does she or her Customs Service officials have evidence that drove the decision to extend it to 12 months?

I have a few more questions. How will consumers and businesses learn about this new term of entitlement under which they can return their goods? What will Customs do to ensure that consumers know that this is what they have an entitlement to do now under this new bill? Next question: will Customs or Inland Revenue be doing an information campaign so that people actually know that they can claim back the GST on returned imports—because there’s not much point in making the rule fairer if those who are supposed to be benefiting from it are unaware that the rules have changed.

I wanted just to let the Minister know that we are in support of this part, just as we were in support of Part 2 of this bill. The final question for this part is: what is the process for claiming the GST refund under the new rules? Will it be automatic, or will people still need to fill out a form?

I’d just like to take a call because I think it’s one of these emerging challenges across regulation and governance that we kind of have to keep up with. The idea of kind of importing something and then sending it back overseas and then getting something replaced just kind of was beyond comprehension probably even 10 years ago, five years ago, but such is the commercial world now that people are buying a lot more online.

The Foreign Affairs, Defence and Trade Committee looked at this and basically saw it as a logical step forward, but I think the questions that the Hon Jenny Salesa asked are ones that the Minister of Customs, hopefully, will answer. It was seen by most people on the select committee as a logical step for a technical glitch to make sure that people don’t—and it might only be $50, it might be a relatively low-value item, but none the less, if they end up paying twice in GST, then it’s not very smart. We just request of the Minister some answers to the questions that the Hon Jenny Salesa put up. Thank you.

CHAIRPERSON (Maureen Pugh): You’re asking a question of the Minister to answer the question of the former—

Hon DAMIEN O’CONNOR: Madam Chair, that’s an excellent, excellent summary. Just in case the Minister didn’t hear the first time.

CHAIRPERSON (Maureen Pugh): Just for my notes. I’d just like to get it correct.

Hon DAMIEN O’CONNOR: Actually, Ministers don’t always answer the question in this House, I’ve noticed.

Yeah, so, firstly, just to pride and assurance, the process of reviewing and granting refunds will be robust. It normally requires submission of supporting information such as showing a record of the export to ensure that the refund is appropriate. From a communications standpoint, Customs or Inland Revenue will inform using the normal release processes which goes out to all the trades—the communication process—as well as updating websites to inform trades, etc. There’s the process when you’re exporting the goods, there’s an information connection through Customs as well, so I’m confident that there is.

Just in answer to the two months only previously, so as most trade was within New Zealand, this was not a bigger issue previously. Now, there is a lot more purchasing from overseas directly by individuals as well as that process. I think the 12 months is more aligning to that warranty period, so that equates to that.

I just have a few more questions of the Minister. For items that are under $1,000 that overseas sellers charge the New Zealand GST when the item is put up on sale, if such an item is returned, does the customer get the GST back from the seller or would they now get it from Customs, because of this new bill?

Second question: we would like clarity on ensuring that no one pays GST twice or pays GST unnecessarily under the various import scenarios. Would it be Customs that would deal with this issue, or would the customers go to IRD?

Lastly, are there any protections against—

Tim Costley: These are frivolous questions—frivolous!

Hon JENNY SALESA: The member on the other side of the House is most welcome to get up and contribute and ask his questions in the normal way, because this is why we are having this committee stage. It is open to every single member of Parliament to take five minutes, take a call, ask as many questions as you like instead of just making a lot of noise from the other side and actually making it harder for us to ask our questions.

Lastly, Minister, are there any protections against abuse of this refund system—for instance, what is to stop someone from importing and then exporting to claim GST back in a fraudulent way?

Just in answer to the last part, which is what I alluded to, this was discussed in the Foreign Affairs, Defence and Trade Committee. It was addressed in my answer previously about Customs providing assurance around the process, the review, and the provision of documentation at the export stage. If a person is purchasing something from a shop and returning it to a shop, the transaction is between the seller and the purchaser within New Zealand, so this GST component isn’t required. You’re returning a good to the shop and the shop is refunding you or giving you a store credit or whatever they do. That’s out of the scope of this discussion. The other part that’s out of scope is anything under $1,000. This doesn’t apply to that.

Thank you, Madam Chair. Thank you to the Minister of Customs for answering these extremely important questions that we have, especially given we’re here under urgency.

My question is in relation to clause 17 (1AB). I’ll just read part of that out so we know where we are. It says, “Goods and services tax is not payable under subsection (1) for any goods if the chief executive of the New Zealand Customs Service is satisfied that, at the time of importation or entry for home consumption under the Customs and Excise Act 2018 (the current importation),” which is the totality of the clause, “(a) goods and services tax has been paid on the importation or entry for home consumption of the goods or substantially the same goods on another occasion (the original importation) before the current importation;”

My question on that part is whether there was a consideration of applying any timing restrictions in terms of the original importation and the time between the original importation and the current importation. My interest in this is also because of paragraph (c), where it says, “the goods of the current importation are goods that are the replacement, repair, or refurbishment of the original importation goods under a written warranty or a written returns policy.” You might consider a circumstance where you had an original importation of goods and then several months later, perhaps more than a year after the fact, you would have a refurbishment of goods, to a different standard perhaps, of adding potentially a significant amount of value to the goods in question.

The question is in two parts. One was the consideration of limiting the period between the two for that section. The second is in terms of looking at refurbishment in particular, or even replacement, if you consider. Was there thought given to replacement or refurbishment where the value of the item might increase, or decrease, for that matter, in a substantial way, and, if so, how the treatment of GST ought to apply in those circumstances? Thank you.

That time frame relates to where there’s a written guarantee, so it’s the period of the written guarantee.

I have just a couple of questions here, and I think there was a question about people perhaps fraudulently using this provision and saying that goods are faulty and then getting a replacement, and then, in fact, some importer is getting two for the price of one and getting an exemption on GST. But there is a legitimate issue here for some people who are sending it over from, say, the US or elsewhere in the world, which is that when they send it over, the cost of sending it back may be such that they’re just prepared to send on another replacement. Now, I don’t know whether that happens very often, but I know that depending on the value of the goods, that might be the best option. There could be a loophole here.

The question for the Minister is: have they checked that the export of those goods, which is required to get the GST refund, or to have an exemption on the second one—I think it’s a perfectly reasonable proposition and requirement, but is there an ability for someone to front and say, “Look, the person I bought it off says, ‘Just dump it, and I’ll send you another one.’, because that may be the cheapest option for them.”? I ask whether there is provision for that in there, and the Minister might be able to clarify.

The second one is the emerging situation of tariffs, of course, and we’ve had New Zealand Post not export items such as this into the US, because there were clear, I guess, calculations of whether they would be subject to the tariff, who should pay the tariff, etc., and whether the GST is then calculated on it, and it won’t be a tariff from there. But if there is a good going back into the US that has come out of the US, will it be tariff-free if it goes back in?

These are, I’d say, technical questions. They might seem like crazy situations, but, actually, with the world that we’re in at the moment, if we’re tidying this up—I know that the Foreign Affairs, Defence and Trade Committee didn’t have the opportunity to have a look at this. Tariffs weren’t on the table, necessarily, but it could be one of the complications, and maybe the Minister has an idea of whether the officials have looked at this in recent days or weeks to see whether this might change the provisions needed in this piece of legislation.

I think the key point here is that we’re talking about goods over $1,000. The issues that we’ve had about those packages being stopped in the States is relating to the small goods stuff, which is the challenge we’re working through at the moment. So this is all relating to over $1,000.

Just to one of the earlier questions about if it was modified and it was more value than it was, then it’s not deemed to be a replacement. I think it’s important to note that when the process under which we’re dealing, if it was going to be disposed of, the process of verifying this and providing the information—and this is what Customs talked about: the robust processes to ensure there’s evidence of destruction or evidence of disposal; those sort of components. It’s not a huge issue, but it is generally of significant items that we’re talking about when we’re talking, and you all know it’s that machinery-type components, which is expensive pieces of equipment. This is what we’re trying to deal with in this space.

Part 3 agreed to.

Clauses 1 and 2