Consumers appear set to pay 15 per cent more for nearly all foreign products bought online after the Government hinted it could follow Australia's proposed changes to internet shopping.
New Zealand officials are working closely with those across the Tasman on moves to lower the threshold for paying GST on goods purchased from Amazon, Apple and other overseas companies.
Australia has the highest threshold for imported goods in the OECD at A$1000 ($1106). But as online shopping continues to rise, its Government may want to slash that to A$20.
New Zealand's limit is $400. Online purchases from abroad rose by 29 per cent in New Zealand last year, and retailers say the GST loophole is hurting local businesses and depriving the Government of revenue.
Revenue Minister Todd McClay is tipped to present a paper on the issue this month.
Prime Minister John Key said the Government had not yet discussed what New Zealand's new threshold could be, but it would definitely have to be lowered.
"Otherwise the gap is too large," Mr Key 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."
Under any changes, big firms abroad were likely to be asked to register for New Zealand GST. The OECD was already beginning this process.
When any New Zealander made a purchase from these companies' online stores, the GST would automatically be calculated at the time.
Retail New Zealand's general manager of public affairs, Greg Harford, said if about 10 to 12 of the largest offshore companies were registered it would capture 80 to 90 per cent of online purchases made by Kiwis.
For smaller offshore retailers a GST duty could be applied at the border for all items worth more than $25.
Mr Harford welcomed the Government's review of online GST rules because the current system created an uneven playing field.
"If foreign websites don't need to pay GST that automatically puts New Zealand retailers at a 15 per cent price disadvantage."
Mr Key conceded that it would be a challenge to make a new tax system work.
"It's pretty easy to get a company like Apple to register worldwide because this is a global issue. The question is can you also deal ... with a small company which sells T-shirts based in LA. That's a very different issue."
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After potential GST changes:$23-$46
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After possible GST changes:$299