Newsletter – November 1 2019

“Woolworths and the underpayment of its staff – now this is clearly one of the biggest breaches that Australia has ever seen from Australia’s largest employer. 

Now the important part about this is Woolworths has self-reported. 

And perhaps the argument could be that the whole award system in Australia is so complicated and convoluted that it needs a complete overhaul because it has caused a lot of issues for companies – big and small” (Listen Here) 

Newsletter – November 1 2019

Next time you turn on Netflix, just stop and think about where your money is really going.

You know – the $9.99 a month for the basic package or $19.99 for the premium – where is that going? (Watch here)

You probably have never thought about it…you wouldn’t be alone. Because, after all, who reads the terms and conditions statements when you sign up? I don’t have time, I don’t expect you too either.

But had you read the terms and conditions closely, you would have found clause 8.1 –

‘Governing Law. These Terms of Use shall be governed by and construed in accordance with the laws of the Netherlands,’

You read right – the Netherlands – cogs, windmills, tax havens! (Read Here)

Because when you signed up with Netflix, you signed up to Holland, not Australia.

As Max Mason in the Financial Review notes, Netflix Australia’s estimated 5.3 million subscribers spend somewhere between $600 million and a $1 billion a year – with all that money going straight to the Netherlands.

As Mason explains “I noticed that Netflix, despite being in the country since 2015, hadn’t ever actually lodged any financial accounts – none were available on the ASIC disclosure. I stared probing around and suddenly a few days later, some accounts turn up.”

“Going through them, it became quite clear that all the money they are earning here in Australia – through Australian consumers – does not stay here.”

“It goes into the Netflix Australia vehicle and then gets sent over to the Netherlands, to their parent company Netflix International.”

“It doesn’t actually get taxed here.” (Listen Here)

The result is – Netflix Australia pays little tax. In fact, Netflix Australia paid just $341,793.

So why is any of this important?

Because the Netherlands, despite an official corporate tax rate of 25 percent (not far off Australia) does not heavily tax dividends or royalties.

It also has what are known as mailbox companies – these provide shelter for companies with offshore income making the effective tax rate is 7.6 percent.

Now, oddly, the Australian Tax Office and the Government thus far have not laid a glove on Netflix or the close-on billion dollar a year revenues it generates – despite their supposed ‘crackdown’ on big-multi-nationals.

Because, as Mason points out, Netflix banks your money in Holland, but pays back a modest amount of money to its Australian subsidiary – $12.1 million – for administration costs.

All this – seemingly – is thoroughly legal…otherwise the tax office would be vigorously pursuing Netflix through the courts.

In June this year, the Federal Communications Minister Paul Fletcher said there is an argument that overseas streaming services should be paying tax in Australia because taxation from traditional broadcasters is dwindling.

But that’s not the reason foreign streaming services should be paying tax in Australia – they should be paying tax in Australia because the revenue is generated right here, not in Holland.

And this means that any multi-national company is immediately at an advantage over a local company because one of their biggest cost inputs – tax- is significantly reduced. Think Stan, Foxtel Now, Kayo.

Now, Government understand the problem of global companies pushing their Australian revenues overseas to low-tax regimes by introducing diverted profits tax – the Google tax.

The Google Tax hits companies with a global revenue of more than $1 billion and Australian revenue greater than $25 million with a 40 percent tax on all local profits.

But, remember, with Netflix Australia $600 million to $1 billion leaves the country (because it’s not technically Netflix Australia’s profit, rather Netflix Internationals which is based in The Netherlands), Netflix International sends back a service fee for administration purposes of $12 million. They pay whatever costs they have – staff, marketing and so forth. (Listen Here)

Its what’s left over from that $12 million that Netflix Australia pays tax on – that’s their profit.

Now, one of the hallmarks of Australia’s tax system is for it to be fair to all taxpayers.

This is important because if some get away with tax avoidance, the ordinary taxpayers questions why they pay their fair share.

And at a time when the government is aggressively (and properly) seeking small business and individuals to comply with tax laws – to pay their fair share – the gaping hole left open for multi-nationals such as Netflix to legally romp out of the country with pockets full of un-taxed Australian revenue needs to be addressed, quick smart. (Listen Here)

If Netflix can do it, why don’t you have the right to send your un-taxed income to a mailbox company in Holland and pay just 7.6 percent tax?

It’s not a bad one for all politicians – and the tax office.

9News –

Sydney Metro bosses put on notice – Watch Here 

Money News –

Google taken to court over allegedly misusing consumer location – Listen Here

Highlight –

If you see an image of me promotion bitcoin…it’s a scam. Don’t fall for it – Listen Here

Previous: 9News: Why more companies are coming forward to admit underpaying staff

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