Watch - The government has announced that foreign companies will be asked to pay GST on goods sold online to New Zealanders from October next year.
Small Business and Revenue Minister Stuart Nash and Customs Minister Meka Whaitiri spoke at Unity Books in Wellington.
Watch the announcement:
GST was applied to digital services from offshore such as Netflix in 2016.
Mr Nash said the move announced today, which would take force on 1 October 2019, would extend it to goods sold online from offshore as well.
However, the tax will essentially be voluntary, with Small Business minister Stuart Nash saying there was no way for the government to effectively police it.
He said the government was expecting "about 75 percent compliance", amounting to about $57m within the first year.
Mr Nash said those companies supplying more than $60,000 of goods or services would be asked to sign up for GST collection.
"We can give them all the information that we require to help them sign up but it's about the credibility of their organisations as well."
He said it was the same way the services change was applied in 2016.
"I think it's much fairer to the retailers, you ask anyone here who's buying a book if they think it's unfair that they're buying a book and not paying GST on it.
"Prices on some products may drop, if you buy a pair of sneakers or a jacket for $200, you pay import duty on that, you pay GST and then you pay processing fees, so you'll actually pay less."
He said despite the difficulty with policing the rule, there would be penalties for overseas companies that did not comply.
"If you're buying something on Amazon, it will be Amazon's responsibility to pay tax on that."
Ms Whaitiri said the move would change how GST was collected, so that instead of applying at the border it would apply at the moment of sale.
"And in turn, buyers of these goods will no longer pay Customs tariffs or border security and biosecurity fees. This will simplify compliance and administration costs at the border," she said.
The system would not change for goods over $400, however.
Prime Minister Jacinda Ardern signalled the move on Morning Report today, saying the government would be announcing "fairer" GST rules.
Finance Minister Grant Robertson in November had to rein in expectations the tax change would be imposed early on, after Mr Nash initially said the government would be making the move.
It comes ahead of the Labour government's first Budget to be announced on 17 May.
Australia had also been planning to collect tax on low-value online goods from last July, but delayed implementation to July this year as it struggled to work out the practicalities. Switzerland is set to introduce one on 1 January next year, and the EU is looking at a similar system.
In the UK and Canada, the equivalent of New Zealand's $400 limit is much lower.