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Federal Treasurer Joe Hockey has confirmed that Australians will face tax on digital products and services from overseas under new measures to be unveiled tomorrow night as part of the 2015 Budget.
Mr Hockey said he would introduce draft legislation to ensure “suppliers of digital products and services into Australia charge the GST on those products,” with the hopes of “levelling the playing field for the GST.”
Dubbed the ‘Netflix Tax’ and widely expected to drop on Budget Night, the measure will see the introduction of the 10 percent GST on “intangible” products such as content streaming services, ebook purchases, app downloads and the purchase of songs, TV episodes and movies through services such as iTunes and the Google Play store.
“It is plainly unfair that a supplier of digital products into Australia is not charging the GST whilst someone locally has to charge the GST,” said Mr Hockey, “When the GST legislation was originally drafted, it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and ebooks from overseas.”
Under the scheme, the Treasurer said Australia was working with overseas suppliers to ensure relevant local taxes are included in their prices when selling to Australian customers.
“What we are doing under this proposal, which is a global proposal, is going to digital providers overseas and saying to them, can you apply the GST to the products you provide into Australia,” he said. “They actually don’t pay it, it’s a tax that is collected and they remit it back to the country where that occurs.”
While the new scheme is colloquially referred to as the ‘Netflix Tax’, Mr Hockey was not mentioning any specific companies that would come under the GST changes today.
“I swore I wouldn’t name any companies today,” he said, but added “it’s pretty evident which companies are involved.”
Despite this, he said that the overseas suppliers were “agreeable” to the concept of applying GST to products provided to Australians.
The change to GST implementation is expected to net AU$350 million in revenues over 4 years, all of which Mr Hockey has said will be passed on to the States and Territories.
Mr Hockey also used the press conference to announce tougher restrictions on tax avoidance by major multinational companies — a topic that has been subject to parliamentary review — giving the Tax Office the power to “recover the tax that should be paid in Australia on the profits that are made in Australia.”
