ONLINE shoppers face "severe" penalties if they are caught taking advantage of loopholes to avoid paying tax on foreign goods.

Overseas retailers are offering Australian buyers fake invoices so that purchases appear to cost less than the $1000 threshold in order to avoid paying GST and import duties.



But under the customs act, shoppers face fines of up to $110,000 if they are caught undervaluing goods.



"The penalties for making a false declaration to Customs can be severe," a Customs and Border Protection spokesperson said.



Online shoppers who undervalue goods could also face fines equal to 20 per cent of the duty shortfall, the spokesperson said.



Consumers can also face a penalty up to 75 per cent of the GST shortfall.



Australian National Retailers Association chief Margy Osmond said the problem is widespread.



"What we’re seeing, particularly out of Hong Kong, is a willingness to supply consumers with dodgy invoices," Ms Osmond said.



"They treat it as a matter of course so you are avoiding paying correct GST."



Ms Osmond said the ANRA has raised the issue with the Government and Customs on several occasions.



Harvey Norman chairman Gerry Harvey said the only way to stop people doing things that are illegal is to punish them.



"When they know nothings done about it - it's no different to me bringing drugs or firearms or anything into the country," Mr Harvey said.



"If I keep getting away with it and keeping doing it and not getting caught I'm just going to up the ante."



Mr Harvey said there were "so many ways" for overseas websites to get around paying import taxes, and some retailers were offering to send items like shoes and earrings one at a time in order to halve the invoice amount.



Ms Osmond said the problem adds to the urgency of retailers' calls to lower the tax-free threshold on goods purchased from overseas websites.



ANRA has made their concerns known to the Government's Low Value Parcel Processing Taskforce, which was set up to review the tax-tree threshold and will deliver its report in July.



David Shafer, executive director of local online electronics retailer Kogan.com, said the Government should be more concerned with policing the current laws, rather than changing the rules "to appease the loudest voices in the retail sector".



"It seems a better course of action would be to ensure the current rules are being properly applied," Mr Shafer said.



This comes as Myer chief Bernie Brookes has warned that there is a "50-50" chance the retailer will scrap their long-term sponsorship deal with the Spring Racing Carnival, including the Fashions on the Field event.



Mr Brookes said he was uncertain the retailer would renew its contract with the carnival when the company’s five-year contract expires after this year’s Melbourne Cup.



"We don't need the spring racing carnival," Mr Brookes told Fairfax. "The world has changed."



In more bad news for the embattled retail sector, Australian Bureau of Statistics showed sales fell 0.2 per cent in April.



It's another blow for the sector as retailers had been banking on a slight boost given the Easter holiday period and relaxing of trading hours in some states.



Clothing sales fell 1.8 per cent and electronics sales fell 2.3 per cent, the Australian Bureau of Statistics figures showed.