Make GST refunds easy for tourists before RWC

Media release
Newmarket Business Association
Sunday 10 January 2010

Make GST refunds easy for tourists before RWC next year

"The possibility of ramping up GST from 12.5% to 15% or 17.5% was one of the measure’s promoted by Government’s Tax Working Group late last year. However incentivising tourism spending would bring greater economic benefits in the longer term," says the head of the country's leading retail district, Cameron Brewer, chief executive of the Newmarket Business Association.

Talk about an increase in GST has recently earned a scorning from the Inbound Tour Operators Council. They believe it would make New Zealand much less competitive in the international tourism market.

"Auckland International Airport says it’s not uncommon for tourists to turn up with receipts expecting a GST refund on their major purchases. Those tourists inevitably leave with a sour taste in their mouths because New Zealand simply doesn’t offer such a facility unless it has been pre-arranged with selected retailers.

As the rules stand only about 200 New Zealand retailers, mostly in Auckland and Christchurch, are registered to the existing tourist refund scheme. For the thousands of other retailers the cost and effort to offer GST-free makes it prohibative.

Current law dictates that GST can only be refunded on purchases if goods are exported or are not taken possession of within New Zealand.

For most retailers any enthusiasm to promote themselves as GST-free is quickly evaporated with the realisation they have to go through a process of registration. Not to mention the fact that participating retailers have to pay seven percent of the retail price of the goods to the airport authority.

Approved retailers then have to courier the goods in sealed bags to Customs at the airport for the outbound customer to remember to collect. In some cases the likes of high-end jewellery retailers, unable to get courier insurance cover, have no option but to hand-deliver the goods to the airport themselves.

Alternatively retailers can post the purchased goods directly to the customer’s overseas address and hope the parcel hasn’t been stolen out of the customer’s letterbox by the time they arrive home.

As most Kiwis have experienced it’s much easier when leaving Australia. Once you’ve gone through the gate, you turn up to the TRS (Tourist Refund Scheme) counter, and produce your purchases and receipts. In exchange you get your GST back.

There are of course a few more conditions such as single receipts have to be worth at least $300 and the goods have to be purchased within 30 days of departure.

What’s more you need to personally show your purchased items to the TRS officer. However the goods don’t need to be in their wrapping. In Australia you can take your purchases out of the shop and use them while on holiday. This makes sense if you’ve bought a video camera or a jacket. Some people are literally standing up in their purchases as they present their receipt along with their boarding pass and passport.
Tourists visiting New Zealand must think it is strange that neigbouring Australia has such a well-promoted and consumer-friendly scheme yet New Zealand’s arrangements are neither.

Tourist refund schemes successfully operate in over 20 countries worldwide. In 2000 when the Australian Government introduced a 10% tax on goods and services and subsequently their Tourist Refund Scheme, the yield from annual tourism spending jumped 8.75%. Tourists now visiting Australia spend an average of $1,320 AUD each on shopping.

Proponents for a better scheme in New Zealand argue that if just five percent of tourists used the revised scheme, it would stimulate an extra $30 million in retail spending by tourists each year.

A scheme akin to Australia’s would benefit retailers the length of the country. Suddenly in the eyes of tourists every piece of New Zealand jewellery, sizable artwork, or designer fashion garment is significantly cheaper. Parliament could achieve this year-round sale by simply passing some minor amendments to the tax free schemes in the GST Act.

What a boost it would be for retail as well as our tourism sector which have had everything thrown at them over the past 18 months. Tourists would feel better about spending and New Zealand generally when they left.

Let’s not forget that annual tourism numbers will only continue to increase beyond the current 2.4 million visitors. Recent figures show that for the month of October New Zealand welcomed the highest number of visitors for any October on record, with visiting Australians leading the charge. Further, with a softening of the border between the two countries, the number of Australian tourists will only grow and Australians will expect to get their GST back.

There has been a long-held view by Kiwis that tourists don’t come to New Zealand to shop, rather than come to sightsee. The reality is they do both. Tourism New Zealand surveys show shopping is a leading preferred activity for tourists visiting our shores.

While the Australian Government actively promotes its TRS facilities, New Zealand’s own Inland Revenue has been on an awareness campaign of its own. Sick of the confusion, the IRD has been reminding tourists that they have to pay GST on all purchases and that refunds are not easily obtained. This is a negative message and a disincentive for tourists to buy those very special gifts while in New Zealand.

The prospect of 60,000 visitors heading over here for the 2011 Rugby World Cup is surely a motivator for the Minister of Tourism John Key to have another look at the issue," says Cameron Brewer.

ENDS

© Scoop Media