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Rival Cries Foul as Netflix Avoids Tax in New Zealand-Aussie Launch

17 Mar, 2015 By: Erik Gruenwedel

With Netflix slated to launch streaming service in New Zealand and Australia March 26, one rival Kiwi service is crying foul. Specifically, Netflix won’t have to pay a value-added tax as a foreign company selling digital content to New Zealand and Australian consumers.

In New Zealand, the goods and services tax (GST) is charged on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution. Not having to pay GST amounts to about a 15% cost advantage to Netflix, which irks regional ITV service Spark, operator of SVOD service Lightbox.

“This is yet another example of the lack of a level playing field in this rapidly changing digital world,” Spark spokesperson Andrew Pirie said in a statement.

Pirie said Lightbox is established as a New Zealand company operating under the country’s rules and paying taxes. He said the same should apply to foreign operations such as Netflix. Indeed, Sky Neon, another SVOD service owned by BSkyB in United Kingdom, is paying GST since it operates Sky Television in the country.

Netflix New Zealand is actually a subsidiary of a legal entity that also operates Netflix Holland — steps Los Gatos, Calif.-based Netflix apparently took to avoid these regulations, among others.

A Netflix spokesperson told PressReader its New Zealand operations are not a local entity and thus not subject to GST.

“There have been discussions in both countries about changing the law on this to collect even from non-local entities, however, that’s something to look at in the future,” the spokesperson said.

New Zealand Revenue Minister Todd McClay, after hearing the protests, March 13 said government officials would look into how other countries are dealing with the issue.

South Africa last summer reportedly became the first country to mandate GST on any foreign-based company disseminating electronic services in the country.


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