Key names iTunes, Netflix in e-commerce tax review

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See also: First phase of GST on e-commerce misses physical goods and Key's hopes for GST online by Christmas look optimistic

The government will launch a discussion document tomorrow (See document here) on how to target tax offshore online shopping, TV and music, which is already costing about $180 million a year in avoided GST and rising, Prime Minister John Key says.

The document will be split into two parts, the first covering services such as Apple's iTunes and Netflix streaming video, and the second on the more complex issue of imported goods, Mr Key told his weekly post-cabinet press conference in Wellington. The government is foregoing about $180 million in lost tax revenue, which will rise with the growing demand consumer demand for online retailing, he said.

The services component will make up the bulk of tomorrow's document, and could be in place by the end of the year as it's an easier issue that can be dealt with by registering large overseas companies as New Zealand taxpayers, Key said.

"In terms of the approach to goods coming across the border, it's more challenging, but I reckon we'll get there," Mr Key said. "The government is trying to balance up the need to be fair to existing retailers with bricks and mortar on the ground and the fact that we've got a hole in our revenue accounts emerging with more and more purchases being on line but also reflecting the fact consumers, both for convenience and not necessarily just price, do want to purchase online."

Local retailers have been struggling to come to grips with the increased demand for online purchases, which avoid GST for all goods services worth less than $400. Government data last week showed a trend of increased sales in non-store retailing, which accounts for local online vendors.

New Zealand officials are working with their Australian counterparts in looking at the tax treatment for imported goods, and Mr Key said the cabinet will probably get a series of recommendations on the goods aspect of discussion document by the end of October.

RAW DATA: IRD discussion document on GST and online purchases (See document here)

(BusinessDesk)