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Australian Budget To Feature 'Google, Netflix' Taxes

by Mary Swire, Tax-News.com, Hong Kong

11 May 2015


Australian Treasurer Joe Hockey has announced new "penalties" for companies that divert profits out of Australia and plans to extend the goods and services tax to offshore suppliers of digital goods.

On May 11, Hockey said that his May 12 Budget will contain two major "tax integrity" measures. He will release legislation to strengthen the anti-avoidance regime and deal with the activities of 30 identified multinational companies.

Australia will not replicate the UK's diverted profits tax. The Government will instead "strengthen our own anti-avoidance laws to ensure the Tax Office has the powers to see through these contrived arrangements," Hockey explained.

The Tax Commissioner will be given the power to recover unpaid taxes and be able to issue a fine of an additional 100 percent of unpaid taxes, plus interest.

Hockey's second integrity measure will establish a level GST playing field for suppliers of digital products and services. Having consulted with the states and territories and Treasury officials, he will release draft legislation for review. The changes are expected to raise AUD350m (USD276.5m) over the next four years, with the money raised going to the states.

"It is plainly unfair that a supplier of digital products in Australia has to charge GST and an offshore supplier does not. When the GST legislation was drafted it did not anticipate the massive growth in supply of digital goods like movie downloads, games, and e-books from overseas," the Treasurer said.

Anna McPhee, CEO of the Australian National Retailers Association (ANRA), welcomed the announcement. She said: "We must strengthen the integrity of Australia's tax system and ensure similar types of goods and services consumed domestically are taxed in the same way, no matter how that purchase occurs. GST on music, books, video games, or fashion is not a new tax and without action, what is currently AUD1bn in foregone revenue from goods and services will continue to rise as global providers of products and services focus more on marketing in Australia."

"The Government's action finally recognizes how the digital economy has changed Australia since the introduction of the GST in 2000 and further highlights the importance of a well-functioning tax system."

TAGS: compliance | tax | tax compliance | tax avoidance | interest | law | goods and services tax (GST) | Australia | ministry of finance | tax authority | offshore | legislation | tax planning | tax reform | penalties | trade association | trade | services

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