Thing
Most Airbnb reservations are GST-exempt because hosts are under the $60,000 GST threshold, but that would change once Airbnb itself becomes responsible for collecting the tax.
The world will be watching the government’s plan to make ‘platform economy’ companies such as Airbnb and Uber levy GST on services booked through their websites, a tax expert has said.
PWC tax partner Eugen Trombitas projected the GST change would bring in at least $100 million a year in taxes, which he said would translate into higher prices for Airbnb accommodation and Uber travel. .
Under a tax bill unveiled last weekdigital platforms offering carpooling, food and beverage delivery, and short-stay accommodation and visitors should collect GST on bookings made through their platforms.
This would change the current situation where Uber drivers and Airbnb hosts are responsible for collecting GST on their services themselves, but only have to do so if they exceed the $60,000 revenue threshold that businesses must pay. register for the GST.
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Uber has confirmed that most of its drivers fall below the $60,000 income threshold, meaning most Uber rides would be GST-free today.
It is understood that the overwhelming majority of Airbnb hosts are also below the threshold and currently do not include GST in their prices either.
Under the proposed new ruleGST should be levied by the platform providers themselves, whether or not their hosts or drivers are GST registered.
Trombitas said the Canadian government had a comparable rule in place for online accommodation companies like Airbnb, and India had a similar rule for ride-sharing services like Uber and restaurant services.
Provided
One would expect the price of Uber Eats, as well as Uber rides themselves, to increase as a result of the law change.
But the New Zealand government’s model would be the widest application of such a tax change, he said.
“Everyone is going to watch. We kind of set the pace here.
The tax bill may need to be amended to remove the requirement for platform companies to charge GST on their service fees to hosts and drivers, to ensure there is no “duplication tax, he said.
The Inland Revenue estimated the GST rule change would bring in $47 million a year once it comes into effect in April 2024.
But Trombitas said based on past IR predictions, that was likely an underestimate.
Previous rule changes that resulted in companies such as Netflix and Spotify having to deduct the GST on their subscriptionsand companies like Amazon ahead collect GST on low value items they shipped to New Zealand both raised more taxes than IR expected, he said.
Under the government’s proposal, drivers and hosts who are below the GST threshold would not need to register for GST to offset the GST they paid on supplies with the GST that will be levied. by their platform provider.
Instead, their platform provider will be required to return just over half of the “GST” they collect to them, as a substitute for the input tax offset they might otherwise claim, and these platform providers will only send the rest to IR.
Trombitas said this aspect of the proposed law change was “quite generous” to hosts and drivers.
But Airbnb and Uber are still expected to lobby against the tax change when it is considered by a select committee.
Uber said it would submit a bid and Airbnb should try to push back against the bill by portraying it as a new tax on tourism.
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