The gaping hole in the federal budget has got Australian tech entrepreneur Matt Barrie concerned about the country’s economic future.
“The greatest disappointment in this budget is that there’s a structural hole in it… and there’s nothing forward thinking to basically redress this in the future,” Barrie told Business Insider.
“The big thing is that you have a structural problem in Australia’s economy and you can see here how one export line item, iron ore, goes down and it just wrecks the entire budget.
“There’s a lot of tinkering around the edges and I understand this had to be a tough budget to try and bring back the deficit but at some point, we’re going to have to think as a country very hard about real structural reform.”
Lower iron ore prices have wiped around $20 billion in tax receipts over the government’s forward estimates. Treasury now forecasts prices to average $US48 a tonne, 50% less than the previous budget forecast.
“There’s a lot of talk about productivity and so forth but the greatest industry in the world to deliver productivity multipliers is technology and there’s nothing really forward-thinking at all that specifically addresses the technology industry and how we’re going to, in the future, bridge this $20 billion gap which is most likely to increase over time as the commodity cycle wanes,” he said.
“Australians seem to be very apathetic to politics nowadays, I think everyone is too busy paying off their mortgages and staying at home watching Netflix which is now going to be more expensive, rather than actually getting out there and doing anything.”
The budget imposes GST on digital products and services, the so-called “Netflix tax”. It’s a measure which Treasurer Joe Hockey says will level the playing field for Australian businesses by mandating that foreign businesses which provide streaming or downloading of movies, music, apps, games, e-books as well as other services such as consultancy and professional services, will have to charge GST — just like their domestic competitors.
Barrie described the tax as a “wedge” which increases the complexity of navigating international tax structures for companies like Barrie’s Freelancer.com as well as the likes of Netflix, AirBnB and Uber.
“If you sell one download, or whatever it may be, into one particular country, you’re going to have to file a tax return in that country. What’s going to end up happening is companies like mine are going to have to file tax returns in every country in the world,” he said, adding it looks like the Australian government has gone further than other regions like Europe which covered digital downloads.
“It’s going to be quite ridiculous,” he said, adding: “It seems that the intention here in Australia is to be further reaching in terms of the things they cover here.”
“At best it’s basically taxation on Australians using the internet which is the greatest productivity tool in modern history.”
Barrie has long championed the abolition of upfront taxation on employee shares allocations. But the $200 million plan to alter the Employee Share Scheme laid out in the budget leaves out many of the larger tech companies in Australia, something which Barrie said was a “lack of structural reform”.
“The fact that they say it’s going to cost $200 million over four years basically shows us how small what they’re doing here is. It’s really just lip service, again it’s carving out all the big companies which promote all the employment in technology,” he said.
The government will require telcos to store information generated by their users — metadata — for two years, a policy decision which will cost $131 million over four years. Barrie said it was “a complete and utter waste of money. It’s also a gross invasion of privacy”.
But he wasn’t all down on Hockey’s second budget. The $5.5 billion package for small business included an instant $20,000 asset write-off and removed fringe benefit tax on mobile devices and the like, both measures which will help startups get going.
“People like [digital retail entrepreneur Ruslan] Kogan and JB Hi-Fi will be very happy about that because you’ll be more inclined to buy a computer,” Barrie said.
“These devices [mobiles and computers] are really mandatory to work anyway so it’s not like it’s really a fringe benefit like a meal or a bottle of wine.”
Barrie is now looking forward to seeing the detail around crowd-sourced equity funding, as Barrie thinks this could be the government’s chance “to do something positive”.
The government said it would remove obstacles to crowd-sourced equity funding as it aims to open up new pools of financing for startups and has set aside $7.8 million over four years for the Australian corporate watchdog, ASIC, to implement and monitor a regulatory framework including simplified reporting and disclosure requirements.
With the budget honing in on small business as a way to stimulate the economy, many big businesses this time around have been left on the sidelines.
“You don’t really expect that much is really going to happen that’s positive [for big business]. In fact there’s going to be more friction and costs, year-on-year, laid in particularly for businesses of any scale. For businesses that really have a chance of driving the economy in the future, there’s nothing really there,” Barrie said.
“They’re explicitly carved out of tax relief, they’re explicitly carved out of the option reforms for share schemes, they’re explicitly carved out of pretty much everything.
“It’s incredibly frustrating to be frank.”
More Budget Coverage:
- AT A GLANCE: All the big items in last night’s 2015 federal budget
- Here are the key budget numbers you’re looking for
- ANALYST: The budget ‘hung the economy out to dry’ and more rate cuts are needed
- This debt chart shows the Abbott government squibbed the tough decisions in the budget
- 31 things you need to know about the federal budget
- Here’s what Australia’s startups think of the stimulus plans in the federal budget
- All the government programs that have been cut in Australia’s federal budget
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