"Netflix Tax" May Soon Be Coming To Your Bill
The government wants to impose "Netflix" tax to the online streaming service subscribers. The cord-cutting trend in the entertainment industry is apparently costing the government millions of dollars. With the traditional network providers now switching to cloud in offering their services, tax authorities want to impose taxes to make up for the revenue losses of on-demand service.
The stock price of Netflix shot up to 20% overnight last month after surpassing analyst estimates of its third quarter financial performance. Forbes reports that the company's profits increased to more than $2B as more subscribers sign up for its streaming services worldwide. With the rising demand for streaming content comes more companies gearing up for their own, with AT&T launching DirecTV Now this month, Comcast's X1, and Amazon to name a few.
For now, there are three areas in the United States that are charging Netflix taxes to subscribers. The first major city to impose "cloud tax" is Chicago in 2015 bumping up Netflix's monthly subscription to 9 percent more, according to a report by Slate. The city estimates tax revenue will reach $12M yearly. The initiative is in line with the city's current amusement tax covering tickets to games, movies, and other entertainment-related events.
According to a report by Heavy, Pasadena is imposing 9.4 per cent Netflix tax that would increase the $9 subscription to almost $10 monthly. This is following the approval of the law by Pasadena voters to tax smartphones and landlines. The report adds that the tax aims to recover revenue losses from the cord-cutting trend. Other California cities that may implement Netflix tax without voters' approval are Alameda, Albany, Gilroy, Hercules, Hayward, Emeryville, San Leandro, Newark, Menlo Park, and Los Altos.
Early this year, Pennsylvania imposed 6 percent "cloud tax" on online entertainment from downloads to apps covering almost $1.3B budget revenue losses from the decline of cable TV subscribers.
