Australia Introduces 'Netflix Tax'

| by Michael Doherty
An Apple MacBook laptop.An Apple MacBook laptop.

Australian lawmakers will soon decide whether Netflix and other digital services are subject to the country's goods and services tax (GST), with the introduction of new draft laws submitted to Parliament on Feb. 10.

The proposal, submitted by Treasurer Scott Morrison, seeks to implement the model used by the European Union, the Australian Associated Press reports. Japan, New Zealand and other countries will soon have similar policies.

The laws, dubbed the "Netflix tax," are expected to bring the Australian government $350 million over the next four years from the taxation of digital services offering books, movies, games and apps.

The tax is aimed at overseas digital products, which are not currently subject to the GST in Australia. Digital subscription services based in Australia are currently taxable, while those offered by companies overseas, such as Netflix, are not.

The Organization for Economic Cooperation and Development recommends digital goods and services be taxed in the country they are being exported to.

"[The tax] ensures Australian businesses selling digital products and services are not disadvantaged relative to overseas businesses that sell equivalent products in Australia," Morrison told Parliament, according to AAP.

Similar taxes have been the subject of debate in the United States, Yahoo Finance reported. Chicago was experimenting with local taxes on cloud services as well as streaming video and music in August 2015. Tennessee and Idaho were also testing similar taxes.

According to data from the Digital Entertainment Group, consumer spending on DVDs and Blu-Rays decreased by about half -- going from $20.2 billion to $10 billion -- from 2005 to 2015. The Recording Industry Association of America reported sales of CDs fell from $13.2 billion in 2000 to $1.9 billion in 2015.

Consumers are likely to be the ones to pay for taxes on digital goods, according to Yahoo Finance's Michael Santoli.

“It reminds me a little bit of when you look at your cable bill and see all the various taxes that are applied there," Santoli said.

Sources: AAP via The Sydney Morning Herald, Yahoo Finance / Photo Credit: Wikimedia Commons

Should digital services be taxed?
Yes - 0%
Yes - 0%