Streaming video giant Netflix paid just $553,705 in tax in Australia in 2020, although the amount paid was up on the previous two years ($485,371 in 2019 and $341,793 paid in 2018).
The small amount of tax paid comes despite estimates that Netflix generated in excess of $1 billion in revenue from its Australian subscribers at the height of the pandemic lockdowns.
Netflix avoids paying tax in Australia by using a company structure that sees a Netherlands-based unit recognising Australian revenue, with its Australian subscribers being billed by that entity and its Australian unit paying the Netherlands unit a fee for its collection services.
From The AFR:
“We comply with all Australian and international tax law. In addition, we continue to invest aggressively in Australian content,” a Netflix spokesman said.
The Financial Review is not suggesting Netflix is doing anything against the law. However, it does call into question how effective the Australian government’s tax reforms have been in getting digital companies like Netflix, Google and Facebook to recognise the money they earn from Australian consumers and businesses in Australia.
Back in 2016, a 32-year veteran industry insider turned whistleblower, George Rozvany, claimed that multinational tax avoidance was “out of control” and costing the federal budget billions of dollars in lost tax revenue every year.
Since then, the Coalition has implemented two key pieces of legislation aimed at reducing multinational tax avoidance:
- The Multinational Anti-Avoidance Legislation (MAAL), which came into effect on 1 January 1 2016; and
- The Diverted Profits Tax (DPT), which came into effect on 1 July 2017.
Clearly, more work is needed to be done by the Australian Taxation Office (ATO) and at the global inter-governmental level to address this type of egregious multinational tax avoidance.
