The threshold for paying GST on foreign products bought online could be cut to $20 or even zero, Prime Minister John Key says.

Mr Key said that if New Zealand followed Australia's lead in changing tax rules for imported goods, it was likely to set similar limits.

Australia has the highest threshold for imported goods in the OECD, at A$1000.

As online shopping continues to increase, the Australian Government is considering a lower limit of A$20 to raise revenue and protect local retailers.


New Zealand's limit is $400.

The Prime Minister said Cabinet did not discuss the issue today, but Revenue Minister Todd McClay was expected to present a present a paper this month.

New Zealand officials were working closely with their Australian counterparts on the issue.

Mr Key said: "It's quite clear from the statements they've been making that Australia is looking to reduce ... the level at which you have to pay GST from $1000 down to $20 and maybe, potentially, to zero."

He said Government had not yet discussed what New Zealand's new limit could be, but it would definitely have to be lowered.

"Otherwise the gap is too large," he said.

"The balancing act for us is always between the Government trying to have a level playing field and not massive inconvenience for the consumer."

Asked whether New Zealand's tax threshold would be similar to Australia's, he said: "Yes, potentially. I can't see why there would be a dramatic difference.

"If Australia can get to a point where they can adequately complete the test of being fair but not dramatically inconveniencing consumers then we should be able to do the same."

Mr Key said it would be a challenge to make the tax system work.

The OECD was working to develop a register of companies, which would include large multi-nationals such as Apple.

"It's pretty easy to get a company like Apple to register a worldwide because this is a global issue, and in the end those big global companies will," Mr Key said.

"The question is can you also deal ... with a small company which sells T-shirts based in LA. That's a very different issue."