UK-style digital tax moves closer

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By Leith van Onselen

Last year, the federal government implemented a Diverted Profits Tax (DPT), affectionately dubbed the “Google Tax”, which armed the Australian Taxation Office (ATO) with stronger powers to fight multinational tax avoidance. The DPT was budgeted to raise around $100 million in revenue a year from 2018-19.

Recently, news emerged that the Morrison Government was seeking to tax large digital companies via a “digital tax” that would tax fees received from Australian customers and an EU-style 3% tax on social media advertising.

Yesterday, the UK Government announced plans to impose a new tax of 2% on digital companies in 2020 – a move that Australia is now expected to follow. From The AFR:

Theresa May’s government would introduce a 2 per cent tax on UK sales of “established tech giants” including search engines, social media platforms and online marketplaces from April 2020, following a consultation period.

…similar moves in Australia [are] likely to raise as much as $200 million a year from players including eBay, Twitter, Uber and LinkedIn, while exempting Australian start-ups…

EY’s Oceania tax policy leader Alf Capito said… “This substantially increases the chance of Australia following the UK and introducing a digital services tax… We pay a lot of attention to what the UK does; the diverted profit tax and bank levy are perfect examples of that”.

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This is promising news and a logical interim step until complex international negotiations are successful in revolutionising the way digital business are taxed globally.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.