Treasury warns government about challenges of taxing digital advertising
Digital advertising through global platforms is going to present problems for the federal government as it looks to tax the online economy, Treasury bureaucrats have warned in a discussion paper.
The Treasury paper, examining the Federal government’s idea to tax digital platforms in May, outlines how governments around the world are taxing digital advertising platforms and the options available in Australia.
In the report, Treasury examines an interim ways of taxing digital advertising platforms while governments and the OECD work towards a co-ordinated system of taxing online multinationals.
Treasury’s taxation discussion paper comes as the ACCC continues its review into digital platforms which is considering whether the global online giants are abusing their market power with consumers and advertisers.
The report examines the European Commission’s proposed Digital Services Tax (DST) of 3%, which would be applied to businesses with total annual worldwide revenues exceeding €750m and EU taxable revenues exceeding €50m.
Also cited as an example is the Hungarian government’s comprehensive advertising tax where advertising appearing on TV, radio, billboards, newspapers and websites is subject to a turnover tax.
Another option is the Indian government’s scheme where a levy of 6% is charged on the revenues earned by non-Indian residents providing digital advertising services to Indian businesses.
The Treasury paper was careful not to recommend schemes along the EU Hungarian or Indian lines. Instead, it suggests an interim measure could apply to revenues earned from providing digital advertising services directed at Australians or paid for by local businesses.
In the paper, the authors flagged a number of problems facing taxing the online advertising industry, writing: “There may be challenges in identifying and enforcing an interim measure on advertising directed at Australian users, in particular where it is paid for by a foreign business to a foreign advertiser. The third option is the narrowest base, but would be simplest to enforce.
“It is also important that an interim measure does not make it easy for businesses to avoid the measure, by, for example, making payments for Australian digital advertising services to offshore entities.
“Administration of an interim measure may be challenging. For example, it may be difficult to apportion a share of advertising published overseas and targeted at a global audience, but viewed by Australians.”
Public consultations on the paper are open until 30 November through the Treasury’s website. Both Facebook’s and Google’s spokespeople declined to comment when approached by Mumbrella as the proposals are only being discussed at this stage.
The paper goes on to warn that the current challenges facing governments trying to tax digital platforms are only the beginning, saying the “continually changing and unpredictable nature of digitalisation will have implications for the tax system”.
“While this paper focuses on the implications of digitalisation for corporate taxation, the government is also considering the broader implications of digitalisation for the Australian economy, for jobs and employment, and from a competition, cyber security, consumer data rights, and tax administration perspective.”
