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Noble: Taxing international tech companies won’t protect digital consumers

When Christopher Columbus arrived on our shores, the Caribs and Arawaks did not know what was about to befall them. Nothing in their past prepared them to understand and deal with the invasion and they were decimated by guns and germs.

Reading two recent local contributions about the phenomenon of our increasingly digitalised world illustrates the applicability of that dilemma. In the first, there was doubt expressed about the capacity of Cambridge Analytica (it really was another version of that company) to influence our elections and in the other, there was a desire to level the taxpaying field between these intruders and our local companies.

Photo: The ubiquitous smart phone…

What is being wrought by the digital companies—Visa cards to Amazon, Facebook, Airbnb to cryptocurrencies—is unprecedented and novel, rendering it difficult to recognise or understand. To use traditional lenses or to focus on bits and pieces is to render the phenomenon invisible. These technologies are not created for consumers’ exclusive benefit but are a means for others to pursue their economic interests.

They trade in an invisible asset—personal data—which we have provided freely for the illusion of happier lives. The deep understanding gained about our lives, where we go, what we buy and who our friends are is then transformed into behavioural data that can predict what we want or will do.

The companies go further to shape our behaviour—think about ‘likes’ and ‘follows’ and games like Pokémon Go—which helps their invisible algorithms to turn on us, causing us to focus on specific things and people thereby locking us in echo chambers.

These ‘giants’ have moved from selling online ads to packaging and selling our personal experiences. They invade and usurp our individual decisions through pop up content and sites which sway us. This weaponizing of data is the gateway to influencing the way we vote and our democratic processes.

Proper tax administration stimulates economic growth. It is pertinent to examine the tax practices of these behemoths, whose growth has spawned new business models which have taken old practices to new boundaries. These practices have included transfer pricing and warehousing intellectual property in jurisdictions that have favourable tax regimes and the liberal use of inter-company transactions.

They rape our treasuries while irreversibly seducing us with their technology. Levying taxes, without an international agreement, on these multinationals will worsen the ‘inequity’ since those taxes would be passed on to the consumer without a flagging of demand.

Photo: Facebook owner Mark Zuckerberg.

To apply effective taxation, we have to disaggregate their value chain, which we still struggle to comprehend. We need a revenue authority that can collect information on the agents and their economic activities, to pass updated laws and install the administrative capacity to apply the legislation.

However, we resist this transformation of our tax administration since we, as a nation, desire to practice tax evasion. Our lack of tax conscience destroys the very businesses we seek to protect.

We have to create new business models that better serve the needs of digital consumers. Amazon unleashes young, creative minds to do so and is prepared to take initial losses and risks. This new game is not for the faint-hearted but requires the adoption of a different mindset. Government’s role is to facilitate innovation by improving the quality and availability of public goods.

About Noble Philip

Noble Philip
Noble Philip, a retired business executive, is trying to interpret Jesus’ relationships with the poor and rich among us. A Seeker, not a Saint.

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