Dunne expecting to make GST change statements

Peter Dunne. Photo by NZPA.
Peter Dunne. Photo by NZPA.
Revenue Minister Peter Dunne is expecting to make further announcements on Monday regarding legislative changes to GST being introduced on October 1.

Mr Dunne recently tried to address some unintended consequences of the Government's move to increase the goods and services tax to 15% from 12.5%.

Legislation is required for the measures that address GST charged on insurance contracts, finance leases and lay-bys.

The legislation would go before Cabinet on Monday.

If, as expected, it was approved, Mr Dunne said he would make a more detailed announcement about the changes later that day.

WHK tax principal Scott Mason expressed concern that major issues facing industries like tourism were not addressed last month.

If someone booked and paid for accommodation in August for October 10, the question was what rate of GST should be applied, especially if the funds were paid but held in trust, he said.

Mr Dunne said in an interview that last year, Prime Minister John Key had reached agreement with the tourism industry regarding GST from overseas suppliers that went well beyond the tourism industry.

The issue of payment for trips and accommodation was not likely to be revisited any time soon, although the GST Advisory Panel was still working on various issues, which would be reported back, he said.

The minister was confident the higher rate of GST would be introduced smoothly on October 1, given the country had four and a-half months to prepare, compared with six weeks in 1989, when GST was first introduced.

"I was confident there would be enough institutional knowledge remaining from 1989 to smooth over the changes.

"But I was wrong. It has taken a lot of work getting people up to speed."

Mr Dunne this week introduced a Bill into Parliament that would mean GST would not be payable on commercial land transactions between GST-registered parties from April 1 next year.

The Bill was designed to prevent so-called "phoenix" fraud schemes.

"To prevent this practice, the Bill will require GST-registered vendors to charge GST at a zero rate on most transactions involving land or in which land is a component if the purchaser is also GST-registered."

The fraud schemes involved Inland Revenue refunding GST to the purchaser with no corresponding payment made by the vendor because it was wound up before paying.

The Government, following a 2009 consultation paper, had signalled its intention to close the loophole in this year's Budget.

A transaction between a registered supplier and a non-registered purchaser remains subject to existing rules.

 

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