Why aren’t we taxing the global tech giants?
The COVID-19 pandemic rages on around the world globally and in Australia, we have this complacency, and a “she’ll be right mate” attitude, probably due to the continued success of limiting the spread of coronavirus in our lucky country.
However the fight against COVID isn’t over yet, and when it is largely beaten, the debt racked up by both state and federal governments will be generational. (Not to mention the missed opportunities to overhaul our carbon emissions based economy and lifestyle.)
Apart from the introduction of GST by John Howard’s Liberal government back in June 1999 (legislated), there has been little change to the taxation system.
GST is applicable to Google and Facebook advertising. However, as technology progresses at breakneck speed, both governments (State and federal) and education seem to get left in technologies progressive wake. (Please don’t interpret this incorrectly. The Westminster system is the greatest in the world, look at our standard of living comparatively globally.) However, the very mechanism that has sustained us so well is struggling to keep pace with technology. (See Moore’s Law)
If I was a state government in Australia right now I would be looking at ways of taxing the global tech giants locally. Let’s not wait for the federal government to pull their fingers out and get a move on here.
Working in the digital marketing space and having come from a major advertising agency background what Google and Facebook have to offer is their ability to target ads in every which way you can think of. The power of digital marketing is phenomenal and it is the power of this targeting that opens the gates for taxing. If a local business runs ads targeting Victoria then the state tax could apply. Something similar to the GST on all ads run and that are targeting Victorian users. (Keep in mind as a user of a service that is online and it is free, then you probably are the product)
Maryland in the United States has just passed laws, legislating such a tax, with rates from 2.5% to 10% dependent on the size of the business selling the Ads. Turnover needs to be in excess of $15 billion to qualify for the 10% tax in the Maryland example. (Something Google and Facebook do in their sleep)
Nobel Prize-winning economist Paul Romer, has been an advocate of a Pougovian tax against tech giants, not only to raise revenue but stem the negative impact outside of a pure dollars and cents economy. Wikipedia describes a Pigouvian tax as “a tax on any market activity that generates negative externalities. The tax is intended to correct an undesirable or inefficient market outcome, and does so by being set equal to the external marginal cost of the negative externalities.”