GST 2017

Untangling the worldwide VAT web on digital supplies

Source: Australian Tax Forum Journal Article

Published Date: 1 Jul 2017


The imposition of value-added tax (VAT) style consumption taxes on so-called digital supplies is a challenge that has been made necessary by general trends of globalisation and the change in patterns of supply and consumption in the modern economy. Part of this challenge relates to the complexities associated with the supply of intangibles, and this complexity is exacerbated by the fact that many such supplies take place across international borders. Tax systems have long been attempting to meet such challenges and these efforts have been redoubled as a result of the OECD/G20 motivated base erosion and profit shifting (BEPS) initiatives aimed at reducing opportunities to minimise taxation using cross-border structures and arrangements. At the same time, the OECD has been proactive in developing guidelines, for application internationally among OECD members, affecting the imposition of the VAT laws. The most common recent efforts to deal with cross-border supplies of intangibles have been the burgeoning examples of the so-called Netflix tax. This is a tax on consumption that might initially be thought to tax consumption of movies, electronic games and similar forms of entertainment.

This article will review the VAT laws applicable to cross-border provision of so-called digital supplies in a selection of jurisdictions, namely, Australia, South Africa, New Zealand and Canada. The authors will critically analyse the taxes on digital supplies in those jurisdictions and determine the extent to which they comply with, or depart from, the OECD guidelines.

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GST 2017

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