Budget 2015: Hockey reveals “Netflix tax” with GST on digital downloads to raise $350m over four years

After dozens of aborted attempts, the federal government has signalled it will finally add GST on digital downloads.

The measure, one of two outlined by Joe Hockey in Canberra yesterday afternoon, will be included in tonight’s budget, and is expected to raise $350 million that will be passed on to the states over the next four years.

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

“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.”

Adding GST to digital goods, Hockey said, would require the cooperation of the global sellers of such products, but, he said, those the Government had spoken to so far were receptive. “All we’re asking them to do is add GST [to goods sold to Australians],” Hockey said. “They’re agreeable … they’re not paying.”

There will be no lower threshold on when the GST on digital goods will kick in, Hockey said.

The measure will not apply to all goods bought online – physical goods shipped over will remain GST-free. Asked about why this was, Hockey referred to government reviews that have found it would be “unbelievably expensive” to charge GST on individual parcelled goods. But GST is far simpler to implement on digital goods, he said. “There [are] only a handful of businesses that transfer digital goods,” he said, adding that the government was hopeful of securing agreement with all of them.

Hockey said many other countries were also introducing similar taxes on digital goods, citing Japan, Norway, South Korea, and Switzerland.