The so-called Netflix Tax that would see overseas-based businesses selling digital products to Australians collect 10 percent GST has entered the House of Representatives.
Introduced by Treasurer Scott Morrison, the legislation is predicted by the government to raise AU$350 million over four years, and would be allocated to the revenue-starved state and territory governments. Morrison said the GST change would ensure local businesses are not disadvantaged when selling to domestic consumers compared to their overseas counterparts.
"It'll be one of the rules of doing business with Australians in this country if you are seeking to sell them services from overseas -- you won't be able to avoid it," he said.
According to Morrison, the current GST rules create an uneven playing field that distorts consumer choice.
"It's also just not very fair ... to Australian businesses that are doing business with Australian consumers, and provides an unfair opportunity for overseas companies to take advantage of," he said.
"This legislation applies the OECD destination principle, which recommends that consumption should be taxed in the destination country of the imported digital products or services."
The idea of applying the GST to overseas companies selling digital products and services was first floated in May 2015 by former Treasurer Joe Hockey, who said it would only impact a "comparative handful" of companies.
For imported physical goods, the GST threshold is set to remain at AU$1,000.
ATO strikes out at multinational tax avoiders
Tax commissioner Chris Jordan is turning up the heat on companies trying to avoid paying taxes by "gaming the system" through delay and obstruction.
Jordan said the companies had pushed the envelope beyond reasonableness, forcing the Australian Taxation Office (ATO) to draw a line under protracted negotiations, which may result in court action.
"Enough is enough ... how is it possible that companies known for their new-age technology and innovative products and services fail to be able to furnish us with basic reports," he told a Senate Estimates hearing on Wednesday.
The ATO commissioner was taking aim at 26 companies being reviewed under the new multinational anti-avoidance laws.
Some of these include foreign companies that argued they have no tax liability in Australia.
These companies were given 90 days notice to produce necessary documentation to back their claims, only to then make a variety of excuses for a further delay.
"It's just gone over the top," Jordan said.
In December last year, the ATO released its first corporate tax transparency report, which detailed the revenue, taxable incomes, and tax payable of 1,539 Australian and foreign entities.
The report revealed that 38 percent of companies detailed did not pay any tax, including Acer, Alcatel-Lucent, Citrix, Dimension Data, HP, MYOB, NEC, Nokia, Toshiba, and Verizon.
At the time, the ATO said that while there were companies that reported nil tax payable, it was because approximately 63 percent of all ASX-listed companies reported a loss to their shareholders in the 2013-14 financial year due to ongoing consequential impacts felt from the global financial crisis, while ASX data showed more than 20 percent of companies make an accounting loss in any given year.
Tech giants Apple, Google, and Microsoft were listed as companies that paid a small fraction of their total earnings in tax.
Apple's total Australian revenue during the 2013-14 year was AU$6.2 billion, but the company paid just AU$74 million in tax; Google made AU$357 million and paid AU$9 million in tax; and Microsoft's total income was AU$568 million, and tax payable was AU$31 million.
All three companies admitted last year that they were being audited by the ATO for tax avoidance.
On the final sitting day of Parliament last year, the Australian Greens voted with the Coalition to pass legislation that will see multinational companies found to be avoiding tax pay back the tax owed, plus a 100 percent penalty.
It is expected that between 800 and 1,200 multinationals will need to report, with 30 to 50 businesses being headquartered in Australia.
"This is a huge win for tax transparency," Australian Greens leader Richard Di Natale said in December. "If we hadn't got this Bill passed today, multinational companies would have enjoyed another full year of not having to disclose their tax on a country-by-country basis.
"We've opened up a crack of light into these dodgy practices, but there's much more to be done."