Would charging GST on Australian Netflix subscriptions push more consumers towards piracy?

THE movies, songs, books and streaming services Australians buy online could be more expensive from next month as Joe Hockey looks to extend the reach of the GST.

Such a move — being dubbed the “Netflix Tax” — would make those products 10 per cent dearer for consumers but could add billions of dollars to the public purse.

Mr Hockey said the plan was an “integrity” measure, not a broadening of the GST; something the Abbott Government has promised it wouldn’t do.

The plan would update the GST to include “intangible services” such as online downloads, which obviously weren’t thought of when the Goods and Services Tax was conceived two decades ago.

It’s been flagged after a week of tax-related hearings in Canberra, including a Senate inquiry into big companies avoiding Australian tax and a meeting of state treasurers discussing a fairer carve-up of GST revenue.

State treasurers have agreed to the measures after meeting with Mr Hockey yesterday.

“The states agreed in principle that we should move in that regard and we have offered to work as quickly as possible with them to introduce legislation to address that,” Mr Hockey said yesterday.

Some online streaming services have already responded to the plan.

Netflix US says it will happily add the GST to the cost of its service once the federal government makes it legal.

Treasury deputy secretary Rob Heferen told a Senate inquiry yesterday that through the work of the OECD it had found compliance costs would be very low if international providers of imported goods had to register and simply pay the GST.

He said there was no legal obstacle to the change.

“Australia wouldn’t need the agreement of any country to do this. The federal government would need the agreement of the states and territories,” Mr Heferen said.

Mr Hockey said the move had the potential to generate billions of dollars in revenue.

It could be followed by a further change involving applying the GST to goods imported online which are valued at less than $1000.

Labor is willing to look at the plan to impose the GST on downloaded products. But Opposition Leader Bill Shorten warns the coalition has a reputation for having “thought bubbles” when it comes to tax.

He criticised the government for not targeting the “big end of town”.

“I’ve some sympathy for people who say that these internet-provided media products don’t pay the GST, but I think we need to go back one step,” Opposition Leader Bill Shorten said.

Australians already thinking of ways around paying

Australians who conceal their location to download music, TV shows, books and music may escape paying the GST even if it is imposed in the Federal Budget.

Consumer advocacy group Choice says Australians who use virtual private networks (VPNs), which make them appear to be outside the country, could avoid the GST.

Instead, the government should tackle the root cause of the problem — the exorbitant domestic costs of TV shows, music and movies, and difficulties accessing them.

“We need to make it easier ... in order to encourage greater competition,” Choice chief executive Alan Kirkland told ABC radio on Friday.