Joe Hockey: The 'Netflix tax' is going ahead

Ahead of the federal budget Treasurer Joe Hockey has said he will level the GST playing field and will introduce GST on digital goods, a measure he expects will bring in $350 million over the next four years.

The cost of online services based outside Australia, such as Netflix, will rise as the federal government prepares legislation to charge GST on services sold in Australia, including downloadable music, software and movies, by companies based overseas.

Netflix launched in Australia back in March and charges $8.99 a month, making it cheaper than local players Stan, Presto and Quickflix which must include 10% GST in their pricing.

“A tax integrity measure will ensure that the suppliers of digital products and services into Australia charge the GST on products,” Hockey said.

“It is plainly unfair that a supplier of digital products in Australia has to charge GST and an off-shore supplier does not.

“We are getting good feel for the amount of money which has been sent offshore but the question is what the taxable amount would be. A number of the companies have been open with us … it is billions of dollars.”

Quickflix CEO Stephen Langsford told Business Insider, “We and other local services pay our taxes so [it’s] only proper that Netflix does as well”.

A Netflix spokesperson told Business Insider, “Netflix has been and will be compliant with all applicable laws and regulations, and we pay taxes as required under local and national law.”

The proposed changes to the tax act will target 30 companies, although Hockey did not specify any one entity, he did say, “This is about the integrity of the Australian taxation system.”

“When the GST legislation was drafted it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas,” he said.

Hockey said this legislation is one of the first of its kind and expects other counties, including Japan, Norway and parts of Europe will introduce similar rules.

“Have no doubt the rest of the world is looking at this legislation,” he said.

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