Retailers say closing a GST loophole that benefits overseas shopping websites will create a long-overdue "level playing field".
Revenue Minister Todd McClay has confirmed he will take a paper to Cabinet this month, which looks to reduce the threshold at which GST and duty is levied on imported goods.
A spokeswoman for Mr McClay said the minister would not be commenting on this issue before the paper goes to Cabinet.
Most goods bought from overseas websites are imported free of GST and duty charges, if they are worth less than $400.
Retail New Zealand general manager of public affairs Greg Harford said the current rules were outdated and did not take into account the dramatic rise of online shopping.
He said it was time for New Zealand to be brought in line with most other countries around the world, which had low thresholds for tax on imported goods.
Mr Harford said New Zealand retailers were struggling to compete with overseas websites, especially ones in small towns.
He hoped the Government would require foreign websites to register for GST and to collect the tax at the time purchases were made.
He said GST should be collected at the border on all items worth $25 or more, if a supplier had failed to register.
"[The loophole] is costing Kiwi jobs but most importantly it's costing the Government a lot of money."
Retail New Zealand estimated that the loophole would cost the Government up to $500 million in revenue this year alone.
"It's undermining the viability of the GST system."
He said retailers were "very pleased" by Mr McClay's decision to try and close the loophole.