Hockey to introduce Google and Netflix taxes in Budget

Overseas companies selling digital products as well as 30 multinational companies shifting profits out of Australia are in the cross hairs of Joe Hockey's second Budget, to be delivered on Tuesday night.

Australia will introduce its own "strengthened" Google tax on 30 companies that shift profits made from Australian operations overseas, as well as hitting up overseas-based companies that sell digital products into Australia for GST payments, known as the Netflix tax, Treasurer Joe Hockey announced on Monday.

Draft legislation introducing both initiatives will be contained in Tuesday night's federal Budget.

Hockey said that the multinational tax avoidance scheme would be harder than the UK's Google Tax -- which levies a 25 percent tax on diverted profits -- and would give the Australian Taxation Office (ATO) the power to recover unpaid taxes, as well as issue a 100 percent fine for the unpaid taxes plus interest.

The scheme is set to be introduced from January 1, 2016, would initially look at 30 identified, but unnamed, companies, and would not be retrospective.

Last month at Senate Estimates, executives from Apple, Google, and Microsoft confirmed that they are being investigated by the ATO. At the hearing, Apple's Australia managing director Tony King claimed not to know of the so-called Double Irish-Dutch Sandwich process of minimising taxation for multinational corporations.

Under the so-called Netflix Tax, overseas companies that sell digital items such as books, music, TV shows, films, and subscription services such as Netflix to Australian consumers would need to pay Australia's 10 percent GST.

Hockey said the measure would raise AU$350 million over the next four years, with every dollar raised going to the states, and would only impact a "comparative handful" of companies.

No date has been set for the introduction of the Netflix Tax, with the treasurer saying the government would consult on its introduction to avoid any "unintended consequences".

For imported physical goods, the GST threshold is set to remain at AU$1,000.

Last week, Assistant Treasurer Josh Frydenberg said levying the GST on online purchases would level the playing field for Australian companies.

"Both [Treasurer Joe Hockey] and I have been quite consistent in our call in providing a level playing field for the provider of key services in Australia, whether they come from overseas or whether they're provided domestically, and this is an area that we've been working with international parters on, trying to get a good understanding of where Australia's tax system should be for the future, because we have a growing digital and e-commerce world, and the tax system needs to stay up with that game," he said.