Improvements to the GST Treatment of Financial Services - the proposed New Zealand approach
01 Dec 02 |
Issue: Vol 13, no 6
Pages: pp. 481 - 486
Exemptions are used in a VAT (GST) system as a substitute for taxing supplies of goods and services when directly taxing those goods and service is impractical or undesirable. Exemption of financial services means that no VAT is charged on the supply of financial services and that the financial institution supplying the services is unable to recover any imput tax on purchases used in making the supply. Financial institutions must either pass on the irrecoverable input VAT to their customers or absorb it into their profit margins, which, either way, constitutes a violation of the VAT system where those customers are engaged in taxable activities. In this article the author describes the New Zealand government's analysis of and response to the distortions created by the exemption of financial services.
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Marie is a Policy Manager with the Policy Advice Division of New
Zealand’s Inland Revenue. Her role is to provide recommendations for
legislative change to the New Zealand Government predominantly in
the areas of GST and tax administration. Marie is also a bureau member
of the OECD’s working party 9 on consumption taxes which is in the
process of developing international guidelines for the GST/VAT treament
of cross-border supplies of services to businesses.
- Current at
02 June 2009