Buenos Aires Issues 'Netflix Tax' on Streaming Media Subscriptions

The city announced a 3 percent gross income tax on all online subscription services offering audiovisual contents, including films, music and video games.

BUENOS AIRES – A 3 percent income gross tax was announced in Buenos Aires on Wednesday on foreign companies offering “online subscription services with access to films, TV shows and other types of audiovisual entertainment broadcasted through the Internet on TV sets, computers and other devices connected to the Internet,” according to Resolution #593 of the City's Revenue Service, which was published on the Official Bulletin.

Although the resolution doesn’t specify which companies will be affected, the tax, which quickly echoed on Twitter as a “Netflix Tax” could reportedly be charged on services like Amazon Instant Video, Spotify and iTunes, as well as games purchased on Facebook and online stores for Xbox and Playstation.

While the tax is targeted directly at streaming services through credit card companies acting as tax withholding agents, a city legislator from Buenos Aires governing party PRO admitted to Infobae TV this could ultimate translate into an increase on prices for consumers.

The issue went all the way up to President Cristina Kirchner, who described the tax as "unfair," and said she used to be a DirectTV client but is now an avid Netflix user.

"They are putting a 3 percent tax on people buying films online. Why don't they put it on cable users, since that is a much more expensive service? Later they explained to us they were only targeting the companies, but aren't they going to load that cost on the users?" she added.

An earlier response had come through the head of Free Consumers organization, Hector Polino, who announced they will ask for an injunction to stop the resolution, which is scheduled to come into effect on Nov. 1.

“Only Congress is empowered by the Constitution to create new taxes,” said Polino, who added that the city “cannot create a tax that exceeds the limits of Buenos Aires” and using credit cards as tax withholding agents “is too difficult and blurry. ”

During the day, as social networks filled with complaints, the head of City Revenue Service, Carlos Walter, had stated on Radio Del Plata that users "won’t be affected at all, since the tax is on the service provider. ” Walter also said that 3 percent is "technically a withholding and not a new tax: We're only demanding its application on foreign companies that today commercialize their services with Buenos Aires consumers and aren’t paying any gross income taxes. These businesses have to register in Argentina and pay taxes in the city."