The federal budget that will be handed down today will, without doubt, contain some controversial measures. But the one that will affect many of is the so-called Netflix tax. More accurately, it’s the enforcement of the GST on digital downloads. And it’s expected to raise about $350 million.
As well as Netflix, it’s expected the GST will be applied to other services such as Airbnb, Uber, Steam and others.
Treasurer Joe Hockey said, “What we’re doing is going to digital providers overseas and saying ‘can you apply the GST to the products you provide into Australia?’. They [technology companies] are agreeable to it. It’s a tax collected and they remit it back to the country where that [GST] occurs.”
In a completely unsurprising statement, Foxtel’s froup director of corporate affairs, Bruce Meagher said, “The Government’s move to enforce GST for the supply of digital content services is the right one. The digital marketplace is an increasingly competitive space and it’s critical to ensure that all players that do business in Australia do so on a level field, with no one player advantaged through tax loopholes.”
So, what would the impact of the GST be on Netflix?
Netflix currently costs between $8.99 and $14.99 per month depending on the number of screens you plan to use Netflix with and whether you like SD, HD or Ultra HD viewing.
In contrast, Presto offers either its TV or Movies channels for $9.99 per month. Stan costs $10 per month.
So, if Netflix’s entry level offer gets a 10 percent price hike for the GST, it will be priced at the same level as its two main competitors.
That means the services will be competing on the quantity and quality of their content.
In our view, Netflix’s reputation and its access to a global catalogue of TV shows and movies will continue to give it an edge in the market.