US video streaming service, Netflix, has revealed it won’t charge local subscribers GST on its services when it launches in Australia next Tuesday.
The announcement is yet another hand grenade into the highly combative albeit nascent video streaming industry in Australia. Only yesterday the Seven-Foxtel owned Presto announced a content deal with 20th Century Fox. While the other major player Stan – a JV between Fairfax and Nine Entertainment – launched in late January with exclusive deals including one with Vodafone.
However, it’s Netflix decision not to charge consumers GST that could be the real game-changer. There are already reports it has the deepest pockets of the three main players and therefore the biggest warchest to purchase the best programs and slug it out with it rivals.
And now it will have a 10 per cent cost advantage over the local Australian players too.
According to Australian tax law only locally based companies can charge the goods and services tax and, being US-based, Netflix claims it is exempt.
The tax has been a major sticking point for many Australian firms – particularly retailers competing against overseas online players – who’ve had to wear the tax impost.
It’s also created headaches for consecutive federal governments – the Rudd/Gillard government refused to change the laws – however, in January this year the treasurer, Joe Hockey, said the issue would be addressed in a pending tax ‘white paper’.
And the competitors are already pissed at Netflix’s tax move. Yesterday, a spokesman for Quikflix was reported in the Fairfax press as saying, “most Australians would expect Netflix to pay their fair share of tax” and that it was “more than odd” Quickflix had to pay GST but not Netflix.
The scenario arguably remains yet another example of governements everywhere – and their tax collectors – failing to keep pace and create a level playing field in this rapidly expanding and disruptive world.
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