Netflix is going to be more expensive in Chicago, thanks to a city tax. The city has expanded its 9% amusement tax to include a number of service providers such as Amazon and Netflix, reports the Chicago Tribune.
To support city’s budget
The new rules came into effect on Monday after lawmakers widened the scope of property lease taxes and amusement to also include cloud-based technologies. Chicago’s local authorities are facing a decline in sales tax revenue from the main street stores. The new ruling is expected to contribute approximately $12 million each year to the budget, says the report, and could be seen as an effort from Chicago Mayor Rahm Emanuel to end the city’s budget woes through existing taxes.
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Previously, the tax was applied to sporting event and concert tickets. Now all paid subscriptions services come under this tax liability, such as streamed digital music and rented movies and TV shows. The applied tax does not cover games, music and movies that are purchased digitally, such as albums and songs or movies bought on iTunes.
Therefore, Netflix lovers only in Chicago are going to spent more due to the inclusion of subscription services in the tax structure. Netflix announced that it will increase its subscription charges due to the tax by Sep 1.
Similar tax on Netflix in Australia
Australia is another example where the U.S. streaming firm’s customers are paying a similar tax. To counter the impact of the tax and solve subscribers’ objections and protests, corporate executives must disclose or publicize government initiatives in detail.
“We’re definitely opposed to a 9% additional tax and this kind of just goes back to what we’ve been seeing recently with the ongoing pension crisis,” said an official From Taxpayers United of America.
Experts believe the increased tax liability will reduce Netflix’s customer list. Now, after Chicago levying a tax of such a nature, there are good possibilities that other cities may consider similar proposals.
In separate news, the price target on the streaming firm has been raised to $730 from $585 by Raymond James analyst Justin Patterson. The new price target represents a 10% upside from Monday’s closing price of $662. Patterson reiterated his Outperform rating on Netflix, citing improving usage and content.