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Why Rachel Reeves must bring in 'Netflix' tax in Spring Budget

Why Rachel Reeves must bring in 'Netflix' tax in Spring Budget

  • 23.03.2025 12:18
  • thenational.scot
  • Keywords: Tax, Netflix

Rachel Reeves must introduce a Netflix tax during the Spring Budget to save the UK's struggling film and TV sectors. Other countries have already implemented similar measures to protect local content.

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Estimated market influence

Netflix

Netflix

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Analyst rating: Buy

Netflix is a major company in the streaming industry. The article discusses the potential imposition of a 'Netflix tax' which would negatively impact Netflix's financial operations and market position.

Context

Analysis of "Netflix Tax" Proposal in the UK

Market Overview

  • Netflix's UK Presence: Netflix reaches 17.1 million UK homes.
  • Revenue and Taxes: Generated £1.7 billion in UK revenue in 2023, with only £14.2 million (0.8%) paid in corporation tax.
  • Subscription Price Increase: Raised subscription prices for its most popular plan to £12.99 a month.

Competitive Dynamics

  • Investment Impact: Netflix invests £5.6 billion in UK content since 2020, but benefits skew towards Southern England, not Scotland.
  • Traditional Broadcasters Struggle: BBC and ITV face budget cuts, leading to production layoffs (e.g., River City axed, affecting 200 freelancers).
  • Global Tax Trends: Other countries like Denmark, Switzerland, Portugal, Hungary, Poland, Norway, Holland, and Belgium are implementing or planning digital service taxes on streaming services.

Business Impact

  • Job Losses: Over two-thirds of Scotland’s film and TV freelancers are unemployed due to reduced production.
  • Cultural Levy Models: Denmark's 5% Cultural Contribution Levy generates £11 million annually, with funds directed to film production and documentaries.
  • Critical Industry Crisis: Peter Kosminsky (Bafta-winning director) describes the funding emergency for British dramas as the "greatest crisis" in his career.

Strategic Considerations

  • Call for Netflix Tax: Proposed 5% levy on UK subscription revenue to support British film and TV content.
  • Regulatory Pressure: The UK risks losing its competitive edge if it doesn’t adopt measures like those in other countries.
  • Government Receptiveness: Department of Culture, Media, and Sport is open to the idea but requires Treasury action.

Long-Term Effects

  • Potential Revival for Local Content: A Netflix tax could provide much-needed funding for UK film and TV production.
  • Job Creation: Increased investment in local content could create jobs and sustain freelancers.
  • Cultural Preservation: Protects indigenous stories and voices from being overwhelmed by globalized content.

Conclusion

The proposed "Netflix tax" is a critical step to address the imbalance between digital streamers and traditional broadcasters, with significant implications for job creation, cultural preservation, and market competitiveness in the UK's film and TV industry.