Abstract:
The incredible growth of electronic commerce has sparked international debate regarding the imposition of value added taxes on online purchases. Immense changes in the way information, goods, and services are stored and exchanged have created increased methods of avoiding, complying with, and administrating GST in New Zealand. The underlying taxation and GST concepts of the place of supply, destination principle, residence, and jurisdiction are relatively easy to apply in practice to tangible goods. However, these concepts are more difficult to apply to supplies of services. This thesis examines the GST treatment of both imported goods and digital services, which have increased in volume with the proliferation of electronic commerce. The De Minimis threshold for imported goods is evaluated against the conditions of a desirable tax system. Comparison between methods of collecting taxation for digital imports of services is also made, focusing on either the consumer, the supplier, or the financial intermediary. The GST treatment of emerging digital payment systems is also considered. The thesis finds that a De Minimis threshold for imported goods improves the simplification of Customs and trade facilitation, whilst decreasing compliance and administration costs. The threshold may influence distortionary behaviour and impose unfair treatment of domestic suppliers, however this is contingent on a range of factors. Extending the reverse charge for imports of digital services is practically unenforceable. Imposing assessment, collection, and remittance of GST on the foreign suppliers of digital services may have more compliance than a reverse charge scheme. However this depends on specific information requirements, the simplification of domestic registration and other factors. The creation of an ‘electronic border’ may be imposed with a collection requirement for financial intermediaries. Conversely such a method may cause distortionary effects and also requires specific consumer location information. The adaption of current technological developments may make the adoption of this solution a future reality. The classification of Bitcoin as money for GST purposes is argued, and the economic realities of the crypto-currency are provided as evidence. The collection of GST on imports paid by crypto-currencies is likely to be difficult, however.