If data is the new oil, the state must assert its right to raise revenue from it – and use it for the public good
Philip Hammond’s decision, announced in Monday’s budget, to introduce a digital services tax is a brave and welcome step into the unknown. It makes Britain the second country, after Spain, to attempt to harness the greed of the tech giants and use the proceeds for social purposes. There is no serious doubt that the giant American advertising companies that own the social media, along with Apple and Amazon, whose business model is rather different, use some remarkably creative accounting to ensure they pay as little tax as possible in the countries where they operate. Facebook is the most notorious example in the UK, reporting a profit margin of less than 5% on revenues here, when its global average profits are closer to 50% of revenue.
By taxing revenue, rather than profits, Mr Hammond hopes to render that kind of accounting pointless. Governments have historically competed against one another to host the big companies by offering them the lowest possible taxes on profits. In Europe Ireland and Luxembourg have been particularly creative in this regard. The proposed tax sidesteps that. Unlike profits, revenues are a measure that the big companies have every incentive to boost. Many of them made no profits for years while working to gain their monopoly positions, and revenue was then a proxy for success.
