This week was budget week in Australia. The annual speech in Canberra’s Parliament by the treasurer is part of the Australian political scene and the lead up to the big day is everywhere. Newspapers and TV discuss extensively the options open to the Treasurer and attempt to double guess the outcome. Afterwards all the newspapers devote column inches and TV hours to discuss the effects on ordinary Australians. There’s really nothing like it in the German political system.
So what happened this year? The general consensus is that the budget was „boring“. An election might be called soon (Australia does not have a fixed parliamentary term and so an election can be called at the whim of the governing party) and it is clear that the ruling Liberal Party did not want to be too controversial – unlike in 2014. Australia is facing two major challenges – as the Financial Times noted – the fall in commodity prices and lacklustre growth. Mr. Hockey, the Treasurer, introduced a budget in which taxes are not raised (and indeed should fall for small businesses) and any new expenditure will be met by redirecting existing funds. The Australian Stock Market reacted positively.
The government is currently forecasting four more years of deficits. Currently it is forecast to be AUD 41.1 Bn to AUD 35.1 Bn in the fiscal year 2015-16 and then fall to AUD 25.8 Bn in the following year (about 1.3% of GDP – lower than the EU’s Maastricht Criterium).
For foreign companies, the impact of the budget is likely to be minimal. Australian will start levying GST (equivalent to VAT/USt) on digital services products, such as videos or e-books, coming into the country. This has been termed the „Netflix“ tax, but will also affect German and European companies, as well as US ones. There is also a commitment to stop companies shifting profits out of Australia to avoid payment of local taxes. This commitment is shared also by the German government.
The Australian Taxation Office will also take over review of foreign investment of real estate in the country. The Treasurer emphasised that Australia was looking for foreign investment of the right sort. In the past few weeks, the newspapers have carried stories about purchase of real estate by non-residents, and the measures are intended to strengthen the goverment’s hand.
On the other hand, European backpackers will lose their tax-free entitlement and will have to pay tax on all of their earnings whilst working and travelling around the country. There is some controversy as to the level of additional revenue that this will bring the government, but it has already lead to some controversy, as reported on the BBC and the ABC.
Full details of the budget can be found at the government’s website here.