'Netflix Tax' could soon bring GST to online services and purchases

Australians could soon pay more for streaming services, app downloads and e-books as part of a tax overhaul that could see GST charged on "intangible" products, as well as online shopping.

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Paul Sakuma

After calling on ISPs and rights holders to crack down on piracy and make it harder for Australians to torrent content online, the Federal Government has announced plans to tax online services that offer legitimate content in Australia.

Dubbed the 'Netflix Tax,' the measure would see the introduction of the 10 percent GST on "intangible" products such as content streaming services as well as eBook purchases, app downloads and the purchase of songs, TV episodes and movies through services such as iTunes and the Google Play store.

As part of the tax reform, Federal Treasurer Joe Hockey also reopened the arguments around charging GST on online purchases below AU$1,000.

Mr Hockey's comments come during a thrilling week of discussions on tax reform, during which the states and territories have haggled over GST, industry leaders called for a level playing field between Australian services and those offered online by foreign competitors, and the heads of some of the world's biggest tech companies faced tough questions about how much tax they pay on Australian sales and profits.

Speaking at a press conference yesterday, Mr Hockey mentioned that a tax on online services was in the works as part of measures to increase the "integrity" of the GST.

"A company providing intangible services into Australia, such as media services or so on, wherever they are located, they should charge GST on those services," he said. "There are a number of those companies that are prepared to charge the GST on the services that they are putting into Australia, but they want to know that they are not at a competitive disadvantage."

Mr Hockey wouldn't name the companies that could be targeted, but promised to work "as quickly as possible" to introduce legislation in relation to these intangible services.

The Treasurer also brought up the spectre of the "low-value threshold" that sees overseas purchases under AU$1,000 avoiding GST -- an issue that has long drawn the ire of bricks and mortar retailers and Australian-based online stores. According to Mr Hockey, addressing this issue would help to provide "competitive neutrality."

Competition and taxing foreign services were also on the agenda at a Senate Committee hearing on tax avoidance this week, when News Corp CEO Julian Clarke said it was "unfair" that local streaming services had to compete with Netflix.

"Netflix do not pay any GST," said Clarke. "They have been able to price themselves below the company that we have, which is Presto. But it is not just us. It is the Fairfax joint venture with Nine, with their streaming company. So this is an unfair, unlevel playing field and we would certainly be looking for Parliament to fix that problem."

For its part, Netflix says it complies with the law as it currently stands.

"Netflix has been and will be compliant with all applicable laws and regulations, and pay taxes as required under local and national law," a Netflix spokesperson said.