Federal treasurer Joe Hockey has announced digital products will now be subject to the goods and services tax (GST) meaning foreign streaming, ebooks, music and games may be increasing in price by ten percent.

Currently, digital downloads of any kind from overseas are offered at a comparatively cheaper rate than domestic services which already include GST. Domestic interfaces of major outlets like Google and Apple already include GST, as do local digital TV subscriptions Presto and Stan. But many other providers like Netflix and Steam do not. The change, the date of which is still unknown, is designed to assist local providers according to the treasurer, who stated “It is plainly unfair that a supplier of digital products into Australia is not charging the GST” when local services are required to do so.

The move comes after consultation by the federal government with the states and territories who receive the GST revenue. For users the outcome is still unknown. There have been numerous instances of Australians paying more than their overseas counterparts for the same content in games and music, sometimes referred to as the ‘Australia tax.’ Whether these companies have been increasing prices for Australians in anticipation of being included in GST (and pocketing the extra profit in the meantime) remains to be seen.

While the change will affect Australian subscribers of the til-now untaxed digital services, there is still the challenge of collecting revenue from those who subscribe directly from foreign servers. Those who go direct to US interfaces for Netflix, Amazon and others would still be able to pay at the same rate without GST included. The technical challenge faced by the federal government in restricting VPN and proxy use appears ever present.

It does appear that only digital imports will be affected, with physical products purchased overseas of less than $1000 value set to remain GST-free. The treasurer addressed the different situations stating that cost-benefit of imposing GST on purchases of a lower value is not as viable. GST on digital services is likely not only less expensive to implement but also appears much more lucrative. The tax is anticipated to generate $350million in revenue from the booming digital industry. Ironically it also means that had Netflix stayed under the old DVD delivery system, importing Netflix discs from an American location may have remained tax-free (though comparatively still much more inconvenient and expensive).

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Nick Harris is a contributor for Streambly. You can follow Nick on Twitter.

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