Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Hansard source

I am really pleased to be able to speak on the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016 today, particularly schedules 1 and 2, which are known around town, in the media, as the Netflix tax. It reminds me of the time when the GST was first introduced and I was in the music business. We were well and truly into international trade of intangible assets, and I remember at the time sitting down with my colleagues and wondering, with the way the world was changing, how on earth the GST would even be applicable in what we thought would be five or 10 years, but it turns out to have been a little slower than that.

This bill deals with the changes in the Australian economy in the last two decades, really, but certainly in the 15 years since the Liberals introduced the GST in the year 2000. It attempts to introduce collection of GST on intangible goods, but unfortunately the bill does not define how that will actually happen. So, while it is good in principle and Labor believes we do need to level the playing field, it is questionable whether or not it is actually enforceable at all, and we will be referring these sections to a Senate inquiry to investigate just that point.

I want to take the House back to the state of the industry in 1998, when the then Howard government campaigned on the GST, and in 1999 and 2000, to give an indication of how long this eroding of the tax base and unlevelling of the playing field between Australian companies and international companies has been heading our way. I remember talking to David Bradbury when he was Assistant Treasurer, in this chamber, sitting on that side during a division, when the percentage of international sales was about five per cent. I remember saying to him: 'It's going to be 10, it's going to be 15, it's going to be 20, it's going to be 25. At the moment it would cost more to collect it than it would raise, but it's going to be a very short time before that changes.' That was apparent back in 1999 for those of us who were already working in the field that led some of the international sales of intangible assets.

The Internet Underground Music Archive, which anybody younger than me—probably a little older than Kate—would remember, was started by a group of kids at the California university in 1993. It was so large it crashed the US systems. Kids were using it so prolifically that every college in the US had to ban the downloading of music, because 60 per cent of downloads in the US in 1993, 1994 and 1995 were music. That is how big it was in 1993. I had one of the founders, Jeff Patterson—I swear he was 12, but I think he was about 18—over to Australia to talk at our national conference on music and the internet in about 1995. By that stage this trend of MP3 download was so huge it was already disrupting the entire music sector—and that was a good six or seven years before the introduction of the GST.

We had already had Bill Kreutzmann out for another forum on music and the internet. He is the drummer from the Grateful Dead. The Grateful Dead was still the biggest-grossing live band in the world, so that must have been before 1995. I think Jerry Garcia died in 1995, so it must have been in the early nineties—I know I had to scrounge for that one! The whole purpose of their talk here was that the Grateful Dead had used the internet. Unlike everyone else, who were so scared, they allowed people to bring cameras in, record their concerts, bootleg them, put them online and sell them any way they wanted to. They encouraged that kind of activity and they remained the biggest-grossing live band in the world. You could already see the beginning of a change in how companies marketed their work.

By the time the GST was actually introduced, Napster had 80 million registered subscribers. It lasted only a couple of years because of copyright issues—and at that stage they were not selling—but it absolutely demonstrated how quickly the world was going to change because the technology made it possible for that early peer-to-peer platform. That is what Napster was: a very early version of what we now hail as something new, which is peer-to-peer—80 million registered subscribers to Napster by the time we introduced the GST. We introduced a GST at a time when it was going to become very difficult to collect tax that way because the world was changing very fast.

Alison Wenham, who was my equivalent in the UK—she was the head of the UK Association of Independent Music—had already come over and met with me to talk about a click-and-drag, cross-border copyright management system that would allow a person in Australia to go to the central website, click on a song and drag it to the Australian continent, and that would form the contract; that would be it. Everything else would be done behind that scene—the payment of royalties. It was incredibly forward thinking by Alison. The UK put funding into it. We started building the Australian national music database to prepare for that future. We started doing that around the same time as John Howard was introducing the GST. Again, those of us who were in the music industry knew that the world was changing very fast and it was only going to be a matter of time before this GST notion of a trader and a purchaser being in the same country would disappear very quickly. We knew that digital sales were going to go through the roof.

If you thought that was really going to change the world, the UK independents and all the copyrighters have now built their copyright hub. They have built a hub, which is an industry owned open data portal, where any piece of copyright—including a photo you put on Facebook—can be registered and traded through click and drag. They have done it. Once that system expands into other territories—and I know the Australian copyright owners are very keen to adopt it as well—there will be an open data system of copyright ownership that will allow an infinite number of small companies to come on and trade in intangible assets of all kinds and in all sorts of ways that we have not even thought of. So, if you think what is happening now is exploding, that is nothing compared with what is going to happen when this very forward-thinking sector—who has been working in the international trade of intangible assets for close to 30 years—gets this large international open data portal up and running. It will explode. It will make a trade in intangibles possible in ways that it currently is not because the difficulty of tracking down copyright ownership and going through the process of getting the right owner et cetera is incredibly complex. This will turbocharge the trade in intangible assets.

At AIRLA—Australian Independent Record Labels Association—as I said, we were well on the way to building the national music database. We had already negotiated a deal with an online distributor that allowed any self-released artist to sell online. We had buy buttons available and a distributer set-up, which meant that all the difficulties in payment at the time were gone. We set-up that system and the database ready for MP3. We were ready to go then. We were sitting there watching a GST come in, which could not have captured what we were talking about even then. Even then legislation lagged behind what the sector was doing in an extraordinary way.

It was in many ways a really exciting time to be alive for those of us who were pushing the future and those of us who were champing at the bit to get to this high-speed transfer. I have said before in this chamber that I asked a tradie to put the ducts and the drawstrings in for fibre when I renovated an office building because I was so ready. As soon as the fibre arrived I wanted it. That was in 1984, and I was ready. Then I waited through the rest of the Hawke-Keating years, then I waited through the Howard years, and then I heard Kevin Rudd talking about the NBN and I thought, 'Finally!' That building is demolished now, but I thought that I might finally get the fibre I had been waiting for since 1984. Then we had a government change and my suburb was taken off the plan and still is not on it. So I am still waiting, some 30 years later. The ducting is gone now.

Many in the music and film industry had been waiting for this. By the year 2000 composers, musicians and post-production people in film were already doing the overnight shift for the US. They were already sending over to Australia the footage they had shot during the day, and it was having soundtracks, editing and everything done in our day and then sent back. They were starting to work 24-hour production shifts on the back of that possibility. We knew that that was only going to grow. We knew that it was not going to be only intangible assets like music and film but also the transfer of labour and skills, and we knew that it was going to come very fast. I had already done my first soundtrack for German cable that way by 2000. Again, it was a world that was changing rapidly. Globalisation in the music and film industry was not about goods and services; it was about the genuine mixing of supply chains—and not the global supply chain in goods and services that we talk about now but the global supply chain in skills, which we are not talking about yet. That is on its way and has been on its way since 1994-95. When we talk about the GST problems in the sale of intangible goods we should also be talking about the transfer across borders—in fact the demolition of borders in terms of the transfer of labour.

Elance—the precursor to Upwork—was founded in 1999. It partnered with oDesk a few years later and created Upwork, which is one of the biggest online portals for freelancers. If you have not had a look, it is quite extraordinary. It literally takes down all borders for freelance work. All borders are gone. Finding skill wherever it is, and using it and paying for it is now as easy as looking something up in the yellow pages used to be. In fact, it is easier; it is incredibly easy. That existed in 1999. The technology and the possibility for those global skill chains, which we are still only seeing developed now, was already there when the GST was introduced. It will be really interesting to see how governments respond to that when it comes to collecting tax. It will be really interesting to see how governments respond to that.

It is good to see the government beginning to act on this. I think they will find it is a much harder tax reform, and it is actually genuine tax reform if it is done properly. I am not sure this is that. It is going to be much harder than they think. Trade online is not a shop. In fact, it will not necessarily be even one business anymore. We see the capacity of peer-to-peer trade changing the whole nature of what a seller is—as you can see through the Airbnb and Uber style portals. They are really just the beginning. They are very close to what we already have. When it genuinely gets going, sales will not necessarily be between Myer and a customer. This legislation treats the collection of GST on intangible products as if that is what we are talking about. We are not. In future years, in a very short period of time, we will see transactions online explode out of a small number of companies and through intermediaries in ways that we cannot imagine.

I would seriously ask the government to consider this. What they have done already is a good start. It is hard to see how they are going to make it stick. It is hard to see how they are going to check it, let alone enforce it. But it is at least an attempt to recognise that there is a major issue looming for small businesses that will find it difficult to compete when we have a tax regime which is different from those they compete with elsewhere. It will erode our tax base much faster than we expect. Congratulations to the government for identifying it, even though it is now 2½ years since they did. Two-and-a-half years is a long time in this business—Napster had 80 million subscribers in two years. It is good to see them starting to move but, my goodness, it needs more work than this. It needs a way of dealing with the flow of money across international borders for intangible services of all kinds, including labour, in ways that are not caught in our current tax system and that put our local businesses at a disadvantage to those that are using those free-flowing international channels. Still, it is a start and I thank the government for that.

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