Kiwis look set to pay more to use their phones when travelling overseas under a tax change proposed by the Government on Friday.
The change would see 15 per cent GST slapped on the cost of overseas roaming charges, from October next year.
At the same time, foreigners roaming in New Zealand would be relieved from any obligation to pay GST here, under the proposal.
Vodafone spokeswoman Kathy Gieck said the proposed rule change had taken it by surprise.
“We will need to take time to assess the impact the proposal could have on roaming customers should it proceed. We will submit on the proposal in due course,” she said.
2degrees spokesman Mat Bolland said it was also taken by surprise. “Clearly this is something we will have to look at. The challenge is overseas roaming is quite often a pain point for consumers and if the cost goes up 15 per cent that is not going to help,” he said. “And it is a cost that will clearly be passed on to customers and not one the industry could avoid,” he said.
Spark also appeared to be taken off-guard, with spokesman Anaru Tuhi saying it would “respond as appropriate once we’ve had a chance to consider our position”.
Deloitte tax partner Allan Bullot, who was among the first to spot the significance of the rule change, said it meant consumers would pay more.
Inland Revenue said “outbound roaming services used by New Zealand residents overseas would be subject to 15 per cent GST” from October next year under the plan.
Revenue Minister Stuart Nash described the existing rule that meant GST did not apply to roaming charges for travelling Kiwis as a “loophole” that was out of step with OECD guidelines.
Although Kiwis would be overseas when they were roaming, under the OECD’s best practice guidelines, a consumer’s “usual place of residence is used to determine which country has the right to tax the consumption of remote services”, he said.
“This means a remote service should generally be subject to New Zealand GST when it is supplied to a New Zealand-resident consumer.”
Kirsty is a New Zealand-resident on holiday in Egypt. Instead of using roaming services on her
New Zealand mobile phone, she purchases an Egyptian SIM card at Cairo airport. The mobile
telecommunications services she receives through her Egyptian SIM card will not be subject to
New Zealand GST.
Steve, Dave and Cameron are Australian tourists on holiday in New Zealand. To avoid paying
international roaming charges while in New Zealand, they purchase a pocket wi-fi device from the
local supermarket. This device provides them with a private wi-fi signal and allows them all to
connect to internet from their respective mobile devices. This mobile telecommunications services
they receive through the pocket wi-fi will be subject to GST at 15 percent.
Submissions on the proposal close on June 28.