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Consumer preferences are changing and that has an impact on how companies make money. One of the less obvious byproducts to come from the consumer shift in valuing access over ownership is that governments are having a hard time finding effective and fair ways of taxing the new generation of companies responding to this evolving value set.

Businesses have figured out a way to expand their companies abroad without establishing a physical presence in more than one country. Uber, Airbnb, Netflix, and Spotify seem to be leading the pack on this front in Argentina.

The upcoming tax reform will be tackling this issue. Alberto Abad, head of AFIP tax collecting agency, explained that since the provider cannot be located by fiscal entities, consumers will be will be taxed when purchasing from these internet-based enterprises. The Buenos Aires City government has already implemented this measures with taxpayers with subscriptions to services such as Netflix.

Introducing “The Netflix Tax”

When Mauricio Macri was the Mayor of Buenos Aires City, he created the “Netflix Tax”. By the end of 2014, the Macri administration imposed a 3 percent supplementary tax on Netflix’s, Spotify’s, and other companies’ final sales price.

Yet since taxing the companies themselves was nearly impossible, the additional cost will have to be taken on by the consumers. Another cost added onto their credit card bill.

Abad clarified how the tax is leveling out the playing field since “A television channel pays taxes, but a website streaming movies doesn’t. The idea is that, when the user pays for the service, the credit card will retain a percentage of the payment”.

The tax was meant to moderately supplement the gross income tax these companies unofficially managed to waive. The reform will be presented by the Macri administration once the midterm elections come to a close and, if passed, will be enforced across the country.

Why not Tax the Companies?

Abad clarified that in order to tax companies, “over a hundred countries would have to reach an agreement”. On an international level, governments have yet to define a permanent solution on how these companies can be charged the corresponding taxes.

According to Cronista, for taxes to be imposed onto Airbnb, Uber, Netflix, Spotify, etc, the Organization for Economic Cooperation and Development (OECD) needs to define what we can regard as a significant digital presence in any given country. This concept can be considered equivalent to companies being physically and permanently established in a country. Only then will a global agreement be reached for how these companies can be subject to taxes.