Netflix Overtakes Foxel In Australia, Government Responds By Taxing Users – But Is That Such A Bad Thing?

Just as predicted, the arrival of Netflix and other streaming services such as Stan, Presto, and Quickflix have caused a drop in Foxtel users. Previously, Foxtel and Optus (who operated as a subsidiary of Foxtel) were the only way Australians could legitimately view American content in a timely matter and thus avoid the maze of online social media spoilers. But now, since Netflix arrived on Australian shores on March 24, 39 per cent of the paid video subscription market belonged to Netflix subscriptions. Foxtel recorded a 10 per cent drop of subscribers over the same time span, which bought them down to 38 per cent of the market.

Australian Netflix users may not be as happy with the Australian version of Netflix, however, with many still sneaking into the US version thanks to a legal grey area where, if Australian users apply a geoblocker, they can enjoy the full Netflix content library. But still enough Australian users are signing up at $AU8.99 a month to enjoy a much cheaper cable service and freeing themselves of the costly Foxtel and Optus services that would range upwards of $AU50.00 a month for the privilege of exclusive content.

However, with the Australian budget announced this week, the Australian treasurer, Joe Hockey, announced he will be implementing a GST tax to the monthly Netflix bill along with other international digital services that are currently in Australia and not yet paying GST.

“It is unfair that overseas based businesses selling services into Australia may not charge GST when local businesses have to charge GST. A local business that employs Australians, pays rent in Australia, pays tax in Australia, and helps build our economy is disadvantaged by the current system.”

The briefing on this new legislation regarding Netflix will center on “streaming or downloading of movies, music, apps, games, e-books as well as other services such as consultancy and professional services receiving similar GST treatment whether they are supplied by a local or foreign supplier.” According to a top Washington lobbyist, Tony Podesta, this will potentially crush the burgeoning streaming service Netflix now offers in Australia.

“Netflix has Australian content and it would be a shame if there were less content available or if the content were more expensive for people because of government taxation… I just think there are easier, smarter and better ways to get government revenue up than trying to tax cyberspace. It’s much more complicated than it sounds.”

According to Adam Turner from the Sydney Morning Herald, a Netflix tax is not such a bad thing – after all, GST is already applied to other digital products, such as the iTunes and Google Play stores and the overseas content they provide to Australian users.

But, with the monthly increase a mere 99 cents, will that really turn Australians away from Netflix and back to their (often) pirating ways? Probably not. Especially since the Netflix tax will not come into play until June 2017. After users have been paying for Netflix services for more than a year, it is unlikely they will shy away from a slight increase when the alternative is either illegal or at least four times the cost of what they are currently paying for their Netflix service.

What do you think – should Australia be charging the Netflix tax? Will you switch off if the monthly cost of Netflix in Australia rises by 99 cents? Let us know your thoughts by commenting below!

[Image credit: Netflix via]