Applying GST to online purchases under $400 from overseas is not a new tax, Prime Minister Jacinda Ardern says.

Speaking to Newstalk ZB's Mike Hosking this morning, the Prime Minister said GST had always been applied to those purchases, but never collected.

"How is GST a new tax? These purchases have always been eligible for GST, they've always had it applicable, it just hasn't been collected. No one would argue GST is a new tax. I really refute that. GST has been around for a number of years. We're just making sure we're improving the collection on certain goods that have been exempt because of collection issues," she said.

Revenue Minister Stuart Nash and Customs Minister Meka Whaitiri are set to make an announcement on measures to collect the 15 per cent GST on low-value goods bought by Kiwis online from overseas, the so-called "Amazon tax", at a bookshop in Wellington.

Advertisement

GST is payable on all goods bought in New Zealand, including overseas online purchases such as books bought on Amazon or Book Depository or goods from Alibaba and eBay.

But the cost of collecting it on small things such as a $40 book, means it is not collected.

The Government's announcement is likely to find a way to make large sellers comply with New Zealand law by registering and collecting GST.

The tax will be on anything under $400. Anything above $400 already attracts duties.

It follows on from the "Netflix tax" which started in October 2016 and which required foreign providers to levy GST on digital services sold to New Zealanders including Netflix, Spotify, iTunes, Kindle, online games and software.

In November, Nash promised further action, saying that leaving out low-value physical goods gave an unfair advantage to overseas sellers compared with New Zealand sellers.

Before the last election, Labour promised not to implement tax changes this term arising from the tax working group.

But applying GST to low-value goods was specifically ring-fenced from that promise by Michael Wood, Labour's revenue spokesman at the time.

Advertisement

The process was already being developed in the system by IRD under the National-led government.

Despite that, the announcement will be seen by some as another broken promise by Labour, which committed to no new taxes in its first term.

A review in 2015 found the government was missing out on about $180 million a year by not collecting GST on online purchases, including $40m from shopping on iTunes, Netflix, Spotify and other online services.

It is expected to raise about $64m in the first year, rising to $81m in two years as the amount of online shopping continues to rise.

Retail New Zealand and Booksellers New Zealand are expected to be delighted.

Nash's move was heralded as "the first time that a Revenue Minister has committed to fixing this issue" by Retail NZ spokesman Greg Hardford.

Local retailers had long been at a disadvantage to overseas sellers, Hardford said.

The same tax will be introduced in Australia in July.