The importance of revenue from Goods and Services Tax (GST) and Value Added Tax (VAT) to governments worldwide cannot be understated. Worldwide, the company tax rates and personal tax rates in general have been falling while the GST and VAT rates have either remained the same or been on the rise. With the world economy slowing down, more governments are increasingly relying on the tax take from indirect taxes to fund their policies.

Evaluation of the GST and VAT systems are therefore very important to assist with keeping pace with the changing environment. As part of the recent tax reforms in New Zealand, the government identified some weaknesses with the GST model used in New Zealand. Consequently, the government issued two discussion documents identifying what these weaknesses were and what it considered were the solution to these issues.

This dissertation considers the weaknesses of the GST model that were identified by the government and discusses in detail what the government had identified as its preferred option of dealing with these weaknesses, the Domestic Reverse Charge mechanism.

The dissertation also focuses on the alternative that was proposed, the compulsory zero- rating provisions, which the government eventually legislated for to address these concerns. Finally, the dissertation will attempt to answer the question as to whether the government has made the right decision in legislating for the zero-rating provisions instead of the proposed DRC.