How the Amazon tax works

Consumers will have to pay GST on most small items they buy from overseas websites from October next year, under a government proposal.

The Government will ask large foreign firms to levy GST on low-value items they ship to Kiwis.

The change will be costly for consumers and will make buying from local retailers more attractive. Yes. If Melissa bought a book costing $50 from Amazon today that is all she would pay. Under the new rule she would pay $57.50, because Amazon would have to add GST.

No-one really knows for sure. Australia will become the first country to levy an Amazon tax on low-value imports in July, so we may find out what the likely level of compliance will be then.

Australia’s tax department has indicated it has a number of tricks up its sleeve to make foreign firms comply. For example, if they don’t play ball the Australian government could grab any payments from Australian firms that owe the foreign company money – or try taking them through the courts in their home country.

Local retailers argue they can’t compete against foreign firms that have a 15 per cent tax advantage. The growth in online shopping means the Government is losing more revenue as a result of GST-free internet shopping. Revenue Minister Stuart Nash forecasts the Amazon tax will raise about $90 million a year, but most tax experts think the real sum is likely to be at least $200m.