New Zealand's retail association is calling on the government to make closing tax loopholes for retail a priority this year.
Under current law, physical goods from overseas come in GST-free up to $400, although duty may apply.
Retail NZ has been pushing for the government to apply GST to online shopping for years, to provide a more even playing field for retailers in New Zealand that have struggled to compete with lower pricing online.
According to Retail NZ general manager for public affairs Greg Harford, the government was missing out on more than $200 million in lost revenue.
"Fixing this loophole is a no-brainer, and easy to do," Harford said.
"The Government needs to act immediately to require foreign firms to register for GST if they are selling physical goods to New Zealanders."
"This will be a cost-effective and simple way to collect the tax."
Harford said Australia was already moving to do this from July this year and New Zealand needed to follow suit.
The government was already making moves to close loopholes which allowed large multinationals to avoid paying their fair share of tax on profits earned in New Zealand, but more needed to be done Harford said.
"There are massive foreign retailers operating in New Zealand today and making online sales to Kiwis who don't pay GST or duty to the Government on most items they sell to New Zealanders," Harford said.
"This deprives the Government of hundreds of millions of dollars in tax revenue every year, and means that foreign firms have a competitive advantage when selling to New Zealanders."
Retail NZ has previously highlighted apparel retailers, including clothing and footwear, as well as books, music and movies and sports gear, as the categories that were most affected by overseas online sales.
The Government needs to act immediately to require foreign firms to register for GST if they are selling physical goods to New Zealanders.
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The organisation said it was aware of a number of retailers that had closed, and job losses resulting from this in recent years.
A number of other regions globally have already begun addressing this issue with Europe requiring companies to register for value added tax (VAT) in other countries and South Africa having implemented tax on digital goods for a number of years.
Harford said requiring GST registration for overseas suppliers wasn't a perfect solution, but it was a start.
"The top 20 global retailers account for two-thirds of all goods being sold to New Zealanders from overseas," he said.
"The introduction of a GST registration requirement for offshore retailers would be a significant step forward in tightening the net on tax avoidance."