Australia Proposes “Netflix Tax” for the Digital Age

Australia's Treasury announced Feb. 10 that it has introduced draft legislation to remove competitive tax advantages for overseas companies in the digital services economy.

“Our tax system was not designed for the 21st century economy,” said Treasurer Scott Morrison, adding that the government is “committed to modernising [Australia’s] tax laws to ensure they are fit-for-purpose in the digital era and do not create an unfair advantage for foreign companies.”

The so-called “Netflix tax” targets overseas vendors of digital products and services including apps, games and e-books. Overseas vendors will be required to register for Goods and Services Tax (GST) in order to report and remit GST on their sales to Australian consumers.

Morrison cited the need to urgent need to reform, stating that “current laws discriminate between a software subscription service provided by an offshore supplier which attracts a GST but a similar software subscription service provided by an offshore supplier may not, creating a competitive advantage for overseas companies.” He added that the proposed legislation is “consistent with OECD guidelines, ensuring that Australia’s approach is aligned with that of many other developed economies on the taxation of digital products.”

The government estimates that reforms will raise around A$350 million over the forward estimates.

The press release can be found here:

by Vanessa Yu, Senior Editor, Bloomberg BNA

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