It's certainly not a new development that big corporations get away with dodging Australian tax payments through the use of offshore accounts. In a 2012 review, former NSW and Victorian premiers Nick Greiner and John Brumby found that not taxing overseas companies cost the Australian government approximately $12 billion per annum. That loss is likely much greater now, as the rate of software downloads has more than doubled in the last three years.
Strengthening the case against such a high GST-free threshold is the fact that Canada and the United Kingdom have much lower thresholds, at $20 and £15 respectively.
We can't really claim, then, that the news of Treasurer Joe Hockey and Assistant Treasurer Josh Frydenberg calling for GST to be included on downloads as an "integrity measure", comes as any surprise. However, while this tax may be good news for the government, requiring minimal redrafting of the current Tax Act and netting them a considerable profit, what does it mean for the general public?
Australia is a nation of people used to paying more than other countries for the exact same products. Long have companies like Adobe, Microsoft and Apple overcharged us, and long have we had no easy or reliable way of getting around it. The new budget is not going to change any of that, unfortunately, with online retail prices set to increase to offset company's GST payments. Consumers may be charged 10% more for downloads of movies, e-books and software from companies based overseas.
GST is already applied to purchases in the iTunes Australia store, so there will be no change there, but popular streaming service Netflix will be affected. New to Australia, the company has stated that they will be happy to add the cost of the tax to its services once all relevant laws have been passed. This will push the price of a Netflix subscription up by 10%.
It can be argued, however, that the change is merely creating a level playing field for local retailers. The change is strongly supported by the the Australian National Retailers' Association and the Shop, Distributive & Allied Employees' Association, as well as all state treasurers bar Western Australia. The NSW, South Australian and Tasmanian premiers have also publicly endorsed the change.
Opposition Leader Bill Shorten has expressed the sentiment that while adding GST to downloads is a good start, the measure needs to be expanded to include all online purchases under $1000.
Not everyone is a fan of the measure, though. Speaking to ABC Radio, Consumer advocacy group Choice chief executive Alan Kirkland has said that taxing downloads doesn't get to the heart of the problem — the exorbitant domestic costs of TV shows, music and movies, and difficulties accessing them. “We need to make it easier ... in order to encourage greater competition,” Kirkland said on Friday.
The same argument can be applied to the issue of illegal downloads: Australia needs a wider range of cheaper, easily accessible products available at the same time as America if we are to stop pirating. No one wants to watch shows or movies on smaller screens at less quality, but if it means not being spoiled due to the massive delays in Australian broadcasts, or if it's the only way viewers have of accessing the product, then it seems logical that consumers will turn to pirating.
It would seem that Australia still has a long way to go in terms of getting its laws regarding online content and purchasing in order. Perhaps the new budget, set to be announced on Tuesday, will be a step forward on the path to catching up with the rest of the Western world in realising and harnessing the power of the internet as a means of entertainment and a retail platform.
If you'd like to generally keep up to date with our news and latest projects, you can subscribe to the RSS feed of these news articles, and if you need to get in contact with us create a ticket in our User Support system or give use a call.