Get ready to add an extra 15 per cent GST on the movies and music you're downloading.
The Government is releasing a discussion document tomorrow about a so-called download or Netflix tax, and it could be in force by Christmas.
It means big US providers of TV streaming services like Netflix will have to start charging 15 per cent GST for the services they offer in New Zealand.
Prime Minister John Key says he thinks people should have to pay tax on online services.
"And in fact there's about 12 jurisdictions around the world that do that including Europe. So it's a well trodden path and it actually works," Mr Key says.
"If you buy for instance Sky TV and you pay for that in New Zealand, you pay GST for the Sky services that you get. Why shouldn't you pay if you take Netflix from offshore or something like that?"
The Government is thought to be losing at least $40 million if not more a year in GST revenue not paid on the e-books, music and digital TV Kiwis buy from overseas sites.
Cabinet has now approved an option to close that loophole.
Mr Key says because it has occurred overseas he thinks the Government should be able to move relatively quickly.
Australia is introducing a digital download tax and that should make it easy for New Zealand to do the same.
PwC tax expert Eugen Trombitas says most global corporates are telling PwC they will comply if it’s made easy to.
“So it's a registration for foreign sellers, with an easy registration system and an easy payment system, and many of them are saying ‘we will comply’.”
GST on imported goods to take longer
Retailers also want GST on physical goods bought from overseas websites. Currently all goods under $400 are GST free.
"It's a 15 per cent challenge every time or before a bookshop and small retailer opens their door,” says Lincoln Gould of Booksellers New Zealand.
But the Government is not yet ready to collect GST on goods crossing the border, due to the complexity of Customs administration costs.
"Goods will definitely be longer would be my guess because we just need to work through the logistics,” Mr Key says.
"I don't see why they need to do that, frankly," Mr Gould says. “It would be disappointing, yes.”
But while the traditional retailers may be left frustrated, Kiwi digital media companies like Spark will be rejoicing.
They already have to charge GST and they'd like to see Netflix and others offshore doing the same.