Closing the digital tax loophole
Consumers are increasingly turning to the growing digital economy to purchase products and services from anywhere in the world which traditionally they may have purchased from Australian suppliers.
Improving the tax system by ensuring the GST applies to digital products and services imported by Australian consumers will help level the playing field between domestic and international suppliers and ensure that all suppliers pay a fair share of tax.
This will result in a more consistent application of the GST to digital products and services.
Australian based businesses must currently account for GST on sales of digital products and services, but their overseas counterparts do not unless their supply is performed in Australia.
Under new arrangements, these anomalies will be removed and Australia’s taxation system will take another step into the 21st century.
Coordinated international action
There is growing international consensus for value-added taxes such as the GST to be applied to digital products and services imported by consumers.
The OECD is developing guidelines for business-to-consumer supplies of imported digital products and services as part of the Base Erosion and Profit Shifting project. These are expected to be finalised by the end of 2015.
A growing number of countries have or will introduce similar rules. These include Japan, Norway, South Africa, South Korea, Switzerland and member countries of the European Union. The Canadian Government also announced that they would consider introducing similar laws.
Closing the digital loophole
These diagrams represent digital products and services that may include online music, movies, e-books and legal and consultancy advice.