Amazon announced on Thursday that local shoppers would be blocked from shopping on its international websites and restricted to using its smaller local platform as the e-commerce giant responds to the government's new GST rules on online purchases.

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The change will limit Australian shoppers to a catalogue of 60 million products, compared with nearly half-a-billion on its US site, potentially driving up prices due to the limited selection of items.

US stores will also be banned from shipping to Australian addresses to circumvent the tax.

"I regret Amazon has taken the decision that they want to try to force customers onto their Australian platform," Mr Morrison said in Sydney.

"Why should a large multinational company, the second-largest in the world, in case of Amazon, owned by the world's richest person, not pay GST on what they sell in Australia?"

Mr Morrison's comments suggest Amazon will be paying the GST. Rather, consumers will be hit with a 10 per cent increase on purchases, and Amazon will collect it and transfer it to the government - a method recommended by the Productivity Commission and adopted by the government.

Labor's digital economy spokesman, Ed Husic, blamed the government for Amazon's decision, saying it had failed to negotiate a mechanism that would allow for both access to the international website and the payment of GST.

"They have to be able to find a balance between consumers and taxpayers," he said.

The Treasurer said companies had been warned about the GST for more than two years, and he found it hard to believe one of the world's most advanced companies had been unable to work out how to apply a sales tax to its products sold in Australia, as it had done with similar taxes in the UK and Canada.

It is understood Mr Morrison has has held five meetings with Amazon since March last year, including one at the retailer’s headquarter in the US. 

The move against the $US702 billion behemoth is a significant escalation in rhetoric from Mr Morrison and signals a wider shift within the government to target multinationals to help pay for its $65 billion of company tax cuts.

"You don't get a special deal because you are a big company or multinational," Mr Morrison said.

"We won't let that wash with this government."

Another live option being considered inside cabinet is a digital tax on all advertising on social media giants Facebook and Google - a move also supported by Labor.

Fairfax Media revealed in May that key Senate crossbenchers were "100 per cent behind the proposal", which could see a tax levied on all advertising in exchange for their support for the Turnbull government's company tax cuts.

Among the options being floated is a European Union proposal for an "interim measure" to implement a 3 per cent tax on all advertising revenue from "globally significant enterprises" with annual turnovers of more than $1 billion.

The tax would not only hit Google and Facebook, but would also be a double-whammy on the likes of Amazon and eBay, which also host advertising on their sites - potentially levying a 13 per cent tax hit on the Silicon Valley icons.

Government sources believe that this "interim measure" - on which Australia is positioning itself as a global leader - is more likely to become a medium-term fix, because of the difficulty of getting Chinese and US tax offices to participate in a global assault on the digital companies.