Online GST jump tipped to be unveiled Tuesday

The outcome of New Zealand's online GST debate may be decided as early as this afternoon, with Revenue Minister Todd McClay's office confirming the discussion document was going to cabinet today, before being released publicly either today or tomorrow.

New Zealand currently has the second highest threshold for imported goods in the OECD with shoppers able to buy products online from overseas up to $400 before being charged GST. There have been renewed calls from retailers recently to lower the threshold and provide a more even playing field for local sellers, boosted by signs that Australia - which has the highest threshold at A$1,000 - may cut this to as little as A$20.

Online purchases from abroad rose by 29 per cent in New Zealand last year, and retailers said the GST loophole was hurting local businesses as well as losing the government money.

Online shopping tax:
• GST is not currently charged on imported digital products such as downloaded music and film.
• Physical goods bought online and worth less than $400 also usually escape GST.
• New Zealand has the second-highest threshold for tax payments in the world.
• Australia has the highest threshold at A$1000 ($1035).
• Most countries' tax threshold is the equivalent of around $25.

According to New Zealand Retailers Association chief executive Mark Johnston, the Government was missing out on more than $200 million annually in tax revenue from online shopping at the current limit, but Deloitte tax partner Allan Bullot said the threshold had not been lowered due to the cost of tax collection being higher than the tax collected.

"The issue is that under the current system, it is effectively customs officers that are the ones collecting that tax and if that threshold is lowered the cost of staff and the process would be more than the tax collected - which is not a workable system."

Bullot said the ideal collection method being looked at was for GST to be charged at the source, meaning retailers would have to register for GST in the country they were selling to, with the extra GST cost but no extra effort required for customers.

"It makes sense for them to impose GST on imports coming into Australia but trying to do it at source rather than the border," Bullot said. "That is the ultimate goal and I think maybe what will happen is you'll get the situation where you have the rule, we know it won't be enforced that much but we'll make sure we pick up the big players."

Lowering the GST threshold would bring New Zealand into line with the rest of the OECD, with most countries implementing a much lower level. Canada has a threshold of $20, Britain at £15 and the United States has no threshold at all, with all imported parcels subject to tax.

Prime Minister John Key has already said New Zealand would lower its threshold, although it had not been decided what that lower limit would be yet. A proposed new $20 limit in Australia would be put to treasurers there when they next met on August 21, and Key has indicated New Zealand was likely to follow Australia's lead.