Australia Introduces 'Netflix Tax' On Digital Goods To Parliament

If legislation introduced by Treasurer Scott Morrison clears Australia's parliament, digital goods such as e-books, games, apps and subscription streaming services from overseas providers will attract the Goods and Services Tax. It's been dubbed the "Netflix Tax", and is expected to raise $350 million for states and territories over the next four years.

As legislation currently stands, digital services provided by Australian companies attract GST, while overseas counterparts do not. However, Organisation for Economic Co-operation and Development (OECD) guidelines recommend that consumption be taxed in the destination country of imported digital goods and services.

Mr Morrison said the changes would "ensure Australian businesses selling digital products and services are not disadvantaged relative to overseas businesses that sell equivalent products in Australia." The European Union recently implemented this system, while Japan and New Zealand are other countries currently working on a similar strategy. [SMH]


Comments

    Old Opposition: How do we get in?
    Old Opposition: I know, sincerely promise no NEW taxes
    New Government: We are mismanaging money and we need more. What should we do?
    New Government: I know, let's introduce NEW taxes.

    Maybe shortly after introducing it they can also increase the GST that way we can have an instant 15% inflation?

      No from the sound of it they'll just privatize medicare so we'll be in the same boat as the USA... Get injured and wind up in hospital... better have insurance!

    $350 million for states and territories over the next four years.

    That's not really that much is it?
    I know it's more about getting people to buy locally but it seems like a huge waste of effort.
    Even more so, now that the dollar is climbing again. Your extra 10% isn't going to achieve anything if the currency exchange rate goes up 10%.

      > I know it's more about getting people to buy locally

      I want to buy some Netflix. There is no local option. I struggle to understand the logic behind making it harder to buy something (overseas content, food truck offerings, software) to support locals. Help out the local guy to make their offering better, don't punish me for not liking their local option more.

    So this is a Tax I have to pay because it goes directly onto my bill. At the same time Apple, Microsoft, Adobe etc are allowed to get away with paying bugger all tax using loopholes and tax avoidance methods. Well done Scott Morrison for again shafting the average Aussie and letting Big Money off the hook :-)

    Adding extra costs onto services we already pay too much for, and have to wait to see episodes. Sounds great. And they wonder why people pirate.

    This scheme will raise less than they expect because it requires compliance from foreign sellers. While large ones like Amazon or Steam might comply, it's almost guaranteed that smaller online stores won't and you can just buy from them instead. It's almost impossible for the law to be enforced on anything but the most popular stores.

      There was a reason they set a cap of $1000 on imports when GST was introduced - it just wasnt cost effective to police it.

      I was there, I was writing the rulings on GST, and when I asked THE expert on the subject why subscriptions werent slugged (as they later were in Europe) with GST, the answer was simple. It wasnt worth it, and on a grander scale, it was too hard to enact.

      Nothings changed, except that maybe that original $1000 amount could drop to $500.

      As you say, all it means is going through a smaller supplier and how do you force them to comply? That's always been the biggest hurdle with this - compliance.

      Its digital, you cant stop it like a physical object at customs, so how do you force Wargaming.net to charge GST on the $2 you just spent in World of Tanks? Or pay it for that matter.

        Don't forget, there are laws now that allow the government to block sites. If they refuse to pay the tax, the government declares they are breaking Australian law and blocks them. You can then use a VPN to get around the block but then you have to play from a different country, including playing with a higher ping, playing against players in a different time zone when their servers are too quiet to find a match or too busy. Is it really worth it for the sake of 20c?

          This is where it gets trickier. See below, but under current laws they have to do approximately nothing. Its the party in Australia that has to do the work at the moment.

          The laws were written with physical products in mind, not bits of data flowing through the internet. Physical stuff can be stopped at the ports and airports, and the person responsible here can be held accountable. There is a natural hostage process that can be followed, but ultimately its the company HERE that holds responsibility to pay, or they dont get their stuff.

          How does that process work when its digital? There is no choke point like customs, and no ABN registered entity at this end of the process. Its direct to the consumer.

          Do people really think blocking websites would work? You'd need to block every online company in the world. Which cripples our economy. Great idea.

            And now that we just signed the TPP (yet to be passed by parliment) we have given the big corporations the ability to sue the Australian Government if we "damage" their trade...eg by blocking their websites.

          Ah but what if you log on to a server that's not so far away so you don't have AS high a ping?

          Either way, your example doesn't extend to most other things as the ping is only an issue for games. Other media doesn't have a ping issue so it would be worth it. Good example though.

            I was replying to a post specifically singling out how there would have to pay tax on ingame transaction and how would the government force it. It was not a general statement.

            Also, TPP will work both ways. It's not just companies being able to sue the government. If a company from a country in the TPP refuses to pay the GST, the government can sue in their country. This will prevent the likes of Adobe and Microsoft and all the rest from being able to avoid taxes.

    Am I the only one finding it strange that Gerry Harvey hasn't said a word since the "levelled the playing field" for retailers like him?

      Pretty sure Gerry Harvey's mind would explode if he found out people were spending money on non-physical objects.

      What? But computer games come in big boxes, with floppy discs! THOSE DERN KIDS

        Either that or he was hoping to keep using the lack of GST as a smoke screen to hide the fact the prices are unrealistic.

        Now his protective haze is gone leaving everything clear as far as the eye can see and he's desperately looking for another way to cover up.

    Does this go against the Free Trade Agreement?

    The worst part is that it'll still be cheaper to buy online. EDIT: worst part for local retailers I mean.

    Last edited 11/02/16 9:21 am

    And cost how much getting the money from them and enforcing said tax?

    Remember when GST was meant to replace income tax? Though I love being taxed on my income then taxed on spending it. A crazy idea might be to work out services we don't need that are wasting money or thinking of ways to earn more money, but that would be the hard work option

      GST was never replacing income tax. It replaced Sales Tax, along with a bunch of other, most of which you would never have heard of.

        yeah i remember at one stage in NSW computers had a 22% sales tax and as such i saw as massive drop in price of computers and other electronic when the gst came in.

          I've had this discussion more than once over the years :)

          Wasnt QUITE dropping from 22% to 10%, Sales Tax was a wholesale tax, and GST was a retail tax, so it ended up slightly different to the consumer - Sales Tax was only calculated once, not at every stage like GST.

          But yeah, in effect pretty much every electronics product was being hit with half the tax.

          What I found though was that people in general didnt pocket that difference. People tended to work to a price with big items, so if they wanted to spend $600 on a tele, they'd spend $600 on a tele. If that tele was $600 under Sales Tax rules, and only $550 under GST rules, they'd get the next model up and still spend $600.

          When Sales Tax was replaced by GST, I saw it with so many people it wasnt funny, most of which then complained how everything was more expensive.

    Scotty: Hay steam, you overseas company not subject to Australian law, pay us $$ plz!
    Steam: nope
    Scotty: well, I'll... uh.... you just... STOPTHEBOATS

    Last edited 11/02/16 9:57 am

      Technically, they ARE subject to Australian law, its just that the law currently says they have to do jack. They are importing a good or service, and as an importer are subject to GST laws.

      Problem is that without a physical product, forcing compliance is quite a problem.

        An importer is someone based in Australia who purchases goods from someone outside Australia.

        The importer in this case is the customer. Not Steam, or Greenmangaming, or Tidal, or Amazon, or HotButAttainableGirls.com.

        If your mum in Botswana sends you a new pair of undies, do you think your mum is subject to Australian law? And how does the Australian Government plan to enforce it's laws in Botswana?

        Or, for an even bigger twist, if you sell one of your sweet pokemon cards on ebay to a kid in Iran, are you now automagically subject to Iranian law?

        (obv, that's not to say that there arent a bunch of areas where the government tries to extend its jurisdiction to offshore entities interacting with australians)

        This is pure political theatre. Same as the stupid 'Australia Tax' circlejerk that achieved nothing but raising the profile of certain politicians. Definitely works to distract everyone from that recent 'raise the GST' thing that had all the battlers crying poor and the pensioners rabblerabbleing.

        Last edited 11/02/16 10:25 am

          Good points, but there are also other things that come into it. The main one is the import limit of $1000.

          If your mum in Botswana sent one lot of undies, nobody would care, but if she sent 1000 packages its a whole different matter. Each package BY ITSELF would be under the limit, but as a whole its clear an import is happening, and thats the basis behind what they want to do. The overall volume says an import is happening, but the rules as they stand dont cover it.

          I was being general, and you're right, in this context the importer is here, not overseas, but the problem here is the issue gets flipped around. A physical import can be stopped and assessed (theres a whole industry around that), and the natural process means you arent going to be sending 1000 packs of undies individually, but in a digital world you can simply because there are no postal costs.

          Which is where the issue starts to be bigger. You sign a contract with Netflix Singapore, not Netflix Australia. As the rules stand, your $10 a month is an import in its own right and being well under $1000 nothing happens. When you look at the million subscriptions though, theres $10,000,000 a month being imported, well over the $1000 limit.

          Thats the basis behind what they want to do. They want to lump all those individual packs on undies into a monthly summary, and figure from there.

            Oh, I get that - I am just waiting with baited breath to find out how they manage to enforce it. Like you said, with no physical product, it's hard to hold goods for release. Maybe that's the real reason for siteblocking legislation...

            Otherwise, they are stuck trying to Australian tax law on Americans, Batswana (!) or Singaporeans. And I can't see that going too smoothly.

              All good. I was in GST for nearly 16 years until moving on last year, and was writing rulings before it started, so kinda know the issues a bit better than most. Like most complicated things, it seems easy on the surface, when in reality it isnt.

              There are some incredibly complicated issues involved here, and the biggest problem is not creating bigger issues while 'solving' this one.

              For example, say they make laws that mean Netflix Singapore is responsible and they need to get an ABN. Does it mean that every business with an online presence needs to register for an ABN? I wonder if people realise how many businesses there are in the world.

              Based on our numbers (roughly 1 ABN per 10 people) thats over 600 million worldwide. How many of those have online sales? Even 1% importing into Australia means potentially 3 times as many ABN's being needed. Thats a lot of work.

                ASIC is already a nightmare to deal with...a few million more ABNs will make it so much better.

                Aaaaand, I am sure with all the creative accounting that larger companies come up with, we'll probably find that the ATO will be refunding the GST paid anyway.

    At the end of the day, we should be paying tax on all of those purchases anyway. If we pay GST on groceries, we should be paying it for online 'retail' too. The fact that you and I don't want to spend more money is irrelevant to the conversation.

    Now the fact that we're already being screwed with 'Australia Tax', and that Apple, Google, Microsoft et al dodge tax like crazy...is a WHOLE different discussion...and totally things that should be fixed before implementing yet another cost to consumers.

      That's the crux of the matter. That not ALL are paying the tax they should be paying. Big Money is avoiding paying tax and it now looks like the government is scrambling to get the middle class to make up the shortfall.

    Maybe Netflix should pay tax but all these streaming services that have finally come to Australia will either raise prices or not release services here in the future. We could see the rise in piracy again. There are some good services in Australia though maybe it will benefit them.

    I wish we'd look at ensuring companies operating here were paying tax and not abusing loopholes before looking at something like this. I'm sure they'd get more money that way.

    It's not a Netflix tax, you all having been looking at this as consumers and from the way the Government is selling it. It is I'm afraid an Adwords TAX.
    Think about the amount of GST revenue the ATO is missing out on through AdWords and these types of services because they have offices in Australia, but for some reason you pay for AdWords in Singapore... make Zero sense to me.
    But it does mean that the Australian public is not getting their fair share!!!

    My Netflix account is an American account. Paid from my American PayPal account. How am I going to get taxed?

    You know one thing they could probably do to save a bit of money? Spend it properly. The amount of stories I hear (from reputable sources, no gossip) about blatantly wasted money spent of stupid priced contracts and services would make your head spin.

    Yeah I mean, I love earning money and paying tax on it, then I buy a game on Steam and pay an Australian price in USD, then the bank spots it and tags me with an international purchase fee. Now the government wants to get their share that they've already taken out of my oncome, and off the banks income.

    I love not having money, but who does?

    I was under the impression, at least on the Australian Xbox digital storefront, that GST is already being charged. I'm sure when I purchase an item on X1 it shows me the price and the GST component :/.

      Companies with an Australian presence already charge GST. This law would affect all companies, whether they have a presence here or not.

    Why tax the consumer when the very companies in question are not paying their fair share. --

    Howabout foreign businesses operating in Australia stop disadvantaging us and pay a more appropriate corporate tax rate.

    Ohhh wait. Then they wouldn't be able to donate as much money to our politicians campaign funds.

    Last edited 11/02/16 2:05 pm

    They want more Aussies to buy legitimate digital content so they raise the price. Yeah, I can see how that makes sense. ..

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