Taxing the technology giants

There is little doubt that technology will drive everything in the coming days. The developed world is witnessing an artificial intelligence-driven transformation of technology, earlier than us—but we are also embracing it. Technology and technological innovation such as artificial intelligence in particular, is so invincible that tech giants are taking over everything. They just create a super-efficient system or platform; we then embrace it and at one point, we are left with no option but to submit ourselves with our belongings to this system.

The move popularly known as “Google Tax” did not immediately benefit the media industry, but gave them a strong legal ground to hold the technology giants financially accountable. PHOTO: DAMIEN MEYER/AFP

For instance, Google generates billions of revenues in USD from Google Ads that posts user-targeted ads on online news portals across the world. Due to its unique nature, news portals are generally the most visited websites in the world after social media platforms like Facebook, YouTube and Yahoo. As a result, Google posts targeted ads (based on Pay-Per-Click or Pay-Per-Impression) in the content-rich news portals. Google does not pay a single dime for the content that is being owned by a different entity. Neither does it pay any tax to the government of the corresponding country from which it is generating income. No doubt it is unfair. Is there anything that can be done? Yes, of course.

Spain did it back in 2014 and became the first country in the world to legally empower media organisations to charge Google for aggregating content that is owned by them. The move, popularly known as “Google Tax”, did not immediately benefit the media industry, but gave them a strong legal ground to hold the technology giants financially accountable. Google announced that it would cease collating such content on Google News. Such response was expected as there is hardly any evidence in the world of a company that comes forward to pay before being asked.

Google is not the lone example here, as there are other technology giants like Yahoo, Facebook, Amazon, etc., that are either aggregating news and contents or doing business and earning revenue from display ads, cloud-based hosting, managed services (e.g. email service) videos, etc.

These are just a few mentionable ones—while there are hundreds of such services from which these technology giants earn revenue. Two examples might help the readers (companies as well) understand how they are paying these giants directly or indirectly. When you call the popular ride-sharing platform Uber, it finds you through google map. After reaching the destination, the rider pays the bill, a tiny portion of which goes to Google. Uber and Google have a separate arrangement for this. The second example can be derived from Facebook—a sponsored post can reach a hundred, perhaps a thousand times more people than what it organically can. All one has to do is pay the social network from his credit card. In both cases, the consumer, be it a company or an individual, are paying these technology giants while the giants are not paying a dime to the national exchequer in Bangladesh from the revenue it is earning every day.

Spain, EU, governments across Europe and India are also coming up with their versions of “Digital Tax”. In July 2019, the senate of the French Parliament passed the “Digital Service Tax” for foreign and domestic companies operating in France. It was later signed by President Macron on July 24, paving the way to tax at 3 percent on the gross revenues earned from digital services including but not limited to adverting services based on user data. In January this year, the Spanish government introduced a bill creating, with provisions, two types of taxes on digital services and financial transactions. Once passed, the law, similar to the French version, will impose a levy of 3 percent on online advertising, online platforms and sales of user data by companies with global revenues of more than 750 million euros.

With a population of 1.33 billion, India is one of the fastest-growing markets for tech giants. The country has introduced the “equalisation levy” that taxes 6 percent on business to business transactions by foreign eCommerce companies from within India. It is a direct tax which is withheld at the time of payment by the recipient of the services. But the problem with this kind of equalisation levy is that it is the consumer that has to bear the burden of the tax. Therefore, the government of the tech-savvy Prime Minister Narendra Modi is now working on developing a framework to bring the tech giants under the tax net. In October 2018, the UK unveiled the plan to bring profitable tech giants with annual revenue of 500 million pounds under the tax net. It will come into effect in April 2020 and is expected to bring 400 million pounds a year to Britain’s treasury. It is mentionable that the move is designed not to affect the consumers or internet startups, but target only the big players. These are country-level developments in Europe and India. Although the European Commission tabled various proposals for a fair and effective tax system in a European digital single market in March 2018, the plan was finally abandoned in March 2019 in the face of opposition from some member states. Instead, the EU is now considering OECD and G20 level international tax discussions.

Now the question is, do the news media and the Bangladesh government have any stake in this? Yes, of course. But it is going to be a very hard nut to crack. First of all, the government must underscore the importance of bringing the technology giants under the country’s legal purview. It also has a responsibility to protect its online platforms, the news media in particular. To this end, both parties should carefully observe and examine the lessons from other countries, the European ones in particular, and work in close collaboration and strategise to find a way forward.

This opinion was first published in the Daily Stay. Click here to read

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