Australian Treasurer Scott Morrison has denied a report by consumer advocate group Choice, saying there is "nothing to suggest" that the Australian Taxation Office (ATO) would use a loophole in the legislation to block overseas websites that do not collect the Goods and Services Tax (GST) on products sold to Australians.

"The Tax Office has any number of ways of enforcing that arrangement; the one that's referred to is the ability to shut down a website," Australian Treasurer Scott Morrison said on Sky News on Tuesday night.

"Now, that's been around for decades. It's a power that has been there -- we haven't created it, it's just one of the many things that the Tax Office can use. It hasn't been used [by the ATO], so there's nothing to suggest to me that this is something they'll put on the top of their list.

"[Commissioner of Taxation] Chris Jordan will deal with these matters sensitively. What we've done here -- another thing we've done over the last 12 months -- is ensuring that we're implementing this plan, which means retailers here at home are on a level playing field when it comes to the GST with those they're competing with offshore."

The report by Choice on Monday identified a loophole in the Telecommunications Act, which vests within the government the power to compel telecommunications providers to assist it in enforcing laws relating to the protection of public revenue; in this case, collecting tax.

Choice said an anonymous Treasury official had explained that the loophole would be used as a "last resort" if a business refused the government's request to collect GST, and refused to comply with international treaties and laws.

"Consumers buy a range of specialty products from overseas-based online stores ... If the federal government is going to start blocking these websites, it will disadvantage local consumers while providing absolutely no economic benefit to Australia," Choice head of communications Tom Godfrey said.

"These products are not available in Australian stores. If the websites that supply them are blocked, consumers will lose out."

The government unveiled its draft exposure legislation for the so-called Netflix Tax in October last year, which will see GST added to all digital products and services purchased online by Australians.

The Tax Laws Amendment (GST Treatment of Cross-border Transactions) Bill amends the legislation to apply the 10 percent GST to all supplies and intangible goods -- including streaming services, apps, games, music downloads, and ebooks -- bought digitally by an Australian consumer from an overseas entity operating within the Australian tax zone by mid-2017.

In order to achieve this, the ATO will request companies that sell over AU$75,000 worth of goods and services to customers in Australia, or AU$150,000 for non-profit entities, to register their products for GST collection.

If passed, the law governing GST on digital products is set to come into effect on July 1, 2017.

The Organisation for Economic Cooperation and Development (OECD) is also working on measures to address the taxation of cross-border digital purchases.

"The OECD is in the process of developing guidelines for the taxation of cross-border supplies of services and intangibles," the explanatory material to the exposure draft of the Bill said.

"Guidelines concerning the place of taxation rules and collection mechanisms for business to consumer supplies are expected to be finalised by the end of 2015."

It added that several countries have already passed laws on the matter and begun taxing digital goods and services, such as the European Union's member states, along with Japan, South Korea, South Africa, Norway, Iceland, and Switzerland.

Last year, the OECD also announced the final recommendations from its two-year, G20-commissioned base erosion and profit-shifting (BEPS) project.

The OECD's recommendations aim to regain up to $240 billion lost globally in revenue every year thanks to tax avoidance -- around 10 percent of worldwide corporate income tax revenue, according to the organisation.