Online prices set to rise as Government budgets for 'Netflix Tax'

A tax on online products and services -- widely dubbed the 'Netflix Tax' -- is slated to rear its head in next week's Federal Budget, meaning Australians could soon be charged an extra 10 percent on "intangible" digital products.

While the 10 percent GST is currently charged on all imports over AU$1,000, foreign goods under this threshold are exempt from the tax. Furthermore, intangible digital products from overseas -- such as eBooks, digital content and software downloads -- do not have GST applied to their prices. As a result, changes to these exemptions could see prices for common digital downloads and services go up for consumers.

Fairfax Media reports that the tax on intangibles will appear in the upcoming budget, and that the Federal expenditure review committee -- also known as the Cabinet 'razor gang' -- has been advised that implementing such a tax would require few changes to the Tax Act.

While we presume Treasurer Joe Hockey is busy poring over the books before unveiling his budget next Tuesday, both Assistant Treasurer Josh Frydenberg and Prime Minister Tony Abbott were doing the rounds today to talk up the benefits of a fair taxation system, including taxes on digital products from overseas.

Speaking to the ABC, Mr Frydenberg said he shared the Treasurer's views that reform was needed.

"Both he [Joe Hockey] and I have been quite consistent in our call in providing a level playing field for the provider of key services in Australia, whether they come from overseas or whether they're provided domestically," he said.

"This is an area that we've been working with international partners on -- trying to get a good understanding of where Australia's tax system should be for the future, because we have a growing digital and e-commerce world and the tax system needs to stay up with that game because if we don't, the taxpayer will be short changed."

However, Mr Frydenberg wouldn't give a firm word on the new tax, saying "the Treasurer will reveal all in next week's Budget".

Speaking to 3AW's Morning program today, Prime Minister Tony Abbott was also declining to comment on the specifics of any new tax arrangements, saying that the Government would have "more to say about that on Budget night".

However, he noted that any tax on online products should be seen "in the context of this general determination to ensure that business is paying the tax where it earns the money".

"There are a number of these Internet-based online businesses like iTunes which are paying GST in Australia," he said. "There are some, I understand, which aren't paying GST in Australia."

For its part, Netflix has previously said on the matter that it would abide by any tax laws that are put in place in Australia.

"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.

Netflix has today declined to comment further.