Law change not expected to scare content providers away

New Zealand's so-called "Netflix tax" has passed its second reading, with a final reading expected to go through and law change passed in as little as a week, before coming into force on October 1 this year.

Under current law, intangible goods such as services, media or software purchased from an overseas online retailer don't fall under the scope of the 15 per cent GST tax.

If the bill goes through, it would see overseas service suppliers, above a threshold of $60,000 revenue per year in New Zealand, having to register for GST here, and charge it to consumers.

At the last vote, both National and Labour voted for the change, with Deloitte tax specialist Allan Bullot saying the law was "certain to go through", but was unlikely to have a major effect on New Zealand consumers.


"For the men and women on the street, they might be paying a little bit more but it won't really affect them," Bullot said.

"It's going to mostly affect the larger companies because they've kept the $60,000 threshold which is fantastic," he said. "So micro-suppliers of remote services to New Zealand won't be caught but it means that there will be a smaller number of large players that will be forced to register to charge GST to New Zealand consumers."

Bullot said the threshold also meant it was unlikely that smaller businesses would have to boycott supplying to New Zealand due to having to register for GST.

"I don't think we'll see a mass number of non-resident providers ceasing to provide downloads to New Zealand or a mass boycott because I think the rules are relatively fair," Bullot said. "It is a short lead-in time though, so there will be teething problems from 1 October 2016, but we can work through those as we go."

The OECD has been working through a set of guidelines for GST on goods and services from overseas online retailers, but there had been concern the process was taking too long, prompting countries to introduce their own laws to deal with the issue.

Introducing the online services tax was logistically easier than the implementation of a tax on goods, Bullot said, although goods was where the money was.

"I'm sure the Government would have loved to have brought in the same type of arrangement for goods ... because that's where the big money is - it's $40 million for services versus $140 million for goods from [IRD] figures."

As part of the proposed law, companies have been aggregated, with individual songs on iTunes or series on Netflix, such as House of Cards and Marco Polo, being viewed as one entity with the supplier, Apple or Netflix, having the tax obligations. The IRD was expected to issue guidance alongside the law being passed around how it was planning to monitor and enforce overseas providers.

Bullot said it would be interesting to see whether businesses raised prices following the implementation but said overall the process was a good one and, barring a few early teething issues, should go smoothly.