Treasurer Joe Hockey has confirmed one of the worst-kept secrets in tax circles, by telling media that there will be a so-called 'Netflix tax', but Netflix is still refusing to rule out a price change as a result.
Ahead of this evening's handing down of the budget, Hockey told media that the move to level goods and services tax on intangible services from overseas was about levelling the playing field.
“It is plainly unfair that a supplier of digital products in Australia has to charge GST and an off-shore supplier does not,” Hockey said.
“When the GST legislation was drafted it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas.”
He said the move would raise an estimated $350 million over the next four years, with the proceeds to be redistributed to the states.
Netflix has previously deflected questions on whether it would raise its pricing because of the potential change, simply saying that it would be compliant with tax laws.
The US streaming giant could either raise the price of its subscriptions by 10% to preserve its margins, or effectively lower its margin by leaving its prices intact.
This morning, Netflix told AdNews that there is still a way to go until any change to the law is enshrined, and until such time it will not comment on pricing.
The government has drafted legislation on the potential tax change, meaning that it still needs to pass parliament before the change is enacted.
Foxtel, a rival of Netflix through its 50% stake in SVOD platform Presto, has come out in support of the government's move.
“The government’s move to enforce GST for the supply of digital content services is the right one. The digital marketplace is an increasingly competitive space and it’s critical to ensure that all players that do business in Australia do so on a level field, with no one player advantaged through tax loopholes,” Foxtel group director of corporate affairs Bruce Meagher said.
“The introduction of this legislation will not only help to maintain consistency across the competitive landscape, but it will also ensure that Australia gets its due taxes from the companies that choose to do business here, which benefits all Australians.”
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