Why the proposal to make Netflix pay tax in Ukraine is nonsense

Explaining it simply.

Former director general of the 1+1 media group, now a People's Deputy and a likely Servant of the People candidate for mayor of Kyiv, Oleksandr Tkachenko proposed introducing a tax for Netflix and other online companies that earn money in Ukraine.

"The European Union has such a rule, and Netflix is, in fact, required to produce no less than 30% of the content that was produced in the EU. The same question arises regarding language. Ukraine is currently not the most attractive market for providers to introduce the Ukrainian language, but we want this. Otherwise, these providers will limit themselves mostly to the Russian language."

The idea is doomed to fail from the start, and it is a pity that People's Deputies waste time on ideas that are at best useless. At worst, they are very harmful. Even the thought of taxing Netflix, YouTube or any other online service that is physically not present in Ukraine in any way is nonsense. And here is why.

Ukraine has no way to restrict the operation of foreign services

Or rather, it does — it can take the path of a ban (as was done with VK, mail.ru and other Russian resources), and, if Netflix refuses to pay taxes, force providers to block access. But one thing is banning resources of an aggressor country, and quite another is applying similar measures to American ones.

There is no more flexible way to shut off access to websites and apps. Fortunately, Ukraine has not created either an analogue of the "Great Chinese Firewall" or the Russian "Roskomnadzor", and it cannot repeat their path, because it would be too expensive and inexpedient.

Netflix and others do not receive services from the state

If Uber, due to its activities, really must register in Ukraine and pay taxes, then all of Netflix's facilities are not located in Ukraine. The state provides no services in return.

If the fact that residents of Ukraine pay for services is considered sufficient grounds for levying taxes, then the question arises: how does paying for a service from an American company, operating in America and merely providing access via the internet to the whole world, actually differ from physical purchases abroad, and how can Ukraine tax this?

Setting this question aside, another arises: how can the state track how many Ukrainians pay for Netflix services, and whether they are located in Ukraine or in another country?

Netflix is essentially no different from any other foreign website

How is Netflix different from The Guardian, that one should collect taxes for access to the Ukrainian internet from some, while others cannot be made to do so even in dreams?

Suppose the fact of paying for services is indeed sufficient to separate Netflix from The Guardian. Then how is Netflix in essence different from the Washington Post, which also charges money for access to its materials? And surely at least several Ukrainians are among its paying subscribers.

Paid services on the internet — media, video services and other services — will become more and more numerous, and Ukrainians will be among their users. Shall we make everyone pay tax?

Ukraine will lose more than it can earn

The Ukrainian market, on the one hand undermined by piracy, and on the other hand underpriced by local streaming services such as MEGOGO or OllTV (in the sense that their services are cheap compared to international ones), cannot be called attractive either for Netflix, YouTube or Apple (referring specifically to the online services of the company, not the sale of iPhones).

In Ukraine, they earn petty money compared to their multi-billion-dollar turnover in the US and worldwide. It follows that:

a) even if they do agree to pay taxes for some reason, Ukraine will receive pennies, and the reputation of an over-regulated country that is better not to deal with.

b) if they do not agree to pay taxes and close access for residents of Ukraine, this will be another terrible blow to the country's business attractiveness.

It is most likely that they will not pay any taxes and will not block access of their services in Ukraine either, while the state, if it officially declares the intention to collect money from them, will look ridiculous and be unable to counter them in any way. Why then voluntarily take such a step?

We are not the US, the EU or China, so that someone would be afraid of losing our market.

In fact, neither Netflix, nor Amazon Prime Video, nor Apple TV+, nor any other services need to be taxed. Quite the opposite — one should wish for as many global online services as possible to operate here and for as many Ukrainians as possible to use their services rather than piracy.

The more paying users Netflix has from Ukraine, the more attractive the Ukrainian market becomes for foreign investors. More investment means more money. More money means richer people. This is far more profitable and promising than hanging a tax yoke on global internet companies.