Netflix tax kicks in — thanks for nothing, Spark

UPDATE: The "Netflix tax" kicked in today as GST is extended to virtual goods bought offshore.

Last month, companies including Adobe, Google, Microsoft and Apple sent emails alerting New Zealand customers they would add the 15% sales tax from October 1.

Interestingly, Google reversed course, however, sending a second email to customers (including me) saying "After receiving confirmation from the local tax authorities, Google is not required to charge New Zealand GST on Google for Work products." (See RAW DATA below for the company's two emails).

On the face of things, that's curious. On the face of things, Google is no different from Adobe's Creative Cloud software or Microsoft's Office 365, Netflix or Apple iTunes -- a service is being delivered from an offshore server to a customer based in New Zealand.

NBR has sought clarification from Inland Revenue.

Today is also the 30th anniversary of the GST.

It was brought in by Labour in 1986 at the rate of 10% on nearly all goods and services.

The rate was raised to 12.5% in 1986 and 15% in 2010 — making the sales tax yet another Labour policy that National has co-opted and expanded.

EARLIER: (Sept 1)

I've received emails from Adobe and Google this morning, informing me a change in New Zealand law will require them to add 15% GST to my monthly subscription fee for Creative Cloud and Apps respectively.

Others have received similar notifications from Microsoft (for Skype).

iTunes will follow. And Netflix will raise its pricing too.

It was the US streaming giant's entry into New Zealand that renewed debate around GST on offshore purchases, triggering the Clark-Cullen / Key-English extension of the tax net that will come into force on October 1 (at least for virtual purchases).

Bricks-an- mortar retailers, who have been so slow to provide decent online services, have long argued for GST on all offshore purchases, but run into practical issues in terms of physical goods. 

Spark reinvigorated the debate by lobbying the government hard on virtual goods, helping to secure a law change (the enabling legislation was passed back in May).

Now, the telco's Lightbox service can compete on a more even footing with Netflix NZ and all of us get to pay 15% more on every single offshore virtual purchase. 

Thanks, Spark. 

The irony is that Spark's Lightbox strategy now largely revolves around giving Lightbox away as a value-add.

Google's Sept 1, 2016 email to customers on GST

This is to inform you that the New Zealand parliament has recently approved a Goods andServices Tax, which becomes effective October 1, 2016. Due to this change, an additional Goodsand Services Tax of 15% will be applied to Google for Work non-business purchases by customers that reside in New Zealand.

Google can’t advise you on tax matters, so please contact your tax adviser for any questions regarding this change.

This service announcement is sent to all our New Zealand customers of subscription products (active as well as inactive) and does not affect your account status or activity.

The Google Payments Team

Google's Oct 1, 2016 email to customers on GST

Google for Work will not be assessing Goods and Services Tax on your account beginning October 1. Since the announcement of the new GST rules on remote services which comes into effect October 1, Google has been working closely with the local tax authorities to ensure it complies with the requirements of the GST law and charges GST on Google products required to be charged under the law. After receiving confirmation from the local tax authorities, Google is not required to charge New Zealand GST on Google for Work products.

Please disregard any previous email you may have received informing you of the application of the Goods and Services Tax on Google for Work products.

Google can’t advise you on tax matters, so please contact your tax adviser for any questions regarding this change.

The Google Payments Team