It looks like Netflix and other foreign services’ subscribers in Australia are going to be taxed for accessing digital services. According to new guidelines from the Australian government, under the Goods and Service Tax on ‘intangible services’, a tariff of 10% dubbed as ‘Netflix Tax’ will be imposed on services such as iTunes purchases, car rides facilitated by Uber and foreign media-streaming services. Of note, Australians already pay the GST on products from domestic digital services firms.
New tax to aid government reserves
According to the Sydney Morning Herald, state and federal financial officers have agreed on the new tax plan, meant to match up with the progress made in the purchasing model. The alterations in GST proposed for the May Federal Budget would lead to an increase of billions of dollars in the government proceeds.
The amendments made to GST, when coming into effect, would impact consumers as they would be forced to pay 10% more for services provided by the overseas firms, particularly the companies that offer digital services. In addition, the new regulations could also put a limit on the price of the goods that one can import from international merchants or websites without having to pay the GST. For now, products worth $1000 can easily be purchased through cross-country trade.
Further, reflecting on the whole issue, consumer advocate firm Choice advised that people of Australia can escape the tax on digital services by using VPNs. The CEO also suggested that the authorities need to lower the costs for media to increase the competition.
Will Netflix be impacted?
What must be noted is the timing of the tax, which comes just days after the launch of Netflix Australia. The tax might raise the cost of the streaming services for viewers, but chances of subscribers leaving Netflix are minimal as the popular content offered by Netflix helps the U.S. firm to retain and add more viewers.
Recently, some big tech companies, namely Google, Microsoft and Apple, have faced an investigation regarding their efforts to avoid corporate tax. Moreover, Uber has been accused recently, by taxi booking service GoCatch, of avoiding GST payments. It has been claimed that these companies transfer their profits to other countries to bypass the high tax rates in Australia.