The French government recently made a move to tax giant digital platform companies like Google, Facebook and Amazon. In retaliation, the Trump Administration signalled its intent to impose yet more tariffs on goods from France. This is not an appropriate use of trade sanctions and sends the wrong signal to sovereign nations everywhere regarding the question of whose rights govern an important new commodity: data.
Data as Currency
The European Union has been making the case for the need to tax platform companies for years. Even the World Bank, in its report The Changing Nature of Work, noted that the tech companies that profit most are paying least, and sometimes nothing at all. Indeed in an uncharacteristically blunt statement, the World Bank noted that “the increasingly digital nature of business only creates more opportunities for tax avoidance.” The European Commission’s Taxation and Customs Union has sensibly noted that the old rules don’t make sense in a new digital economy. On average, platform companies pay less than half the tax of traditional companies. This is, in part, because their biggest asset is unbooked.
Data is the new currency. Companies like Facebook bank billions on the trade in personal user data. The fact that a very small handful of global firms have monopolized this resource represents a 21st century tragedy of the commons. People are the producers of this important resource in every single online transaction they undertake, and this brings to light a new question: who owns their data? Do individuals own it? If they are citizens of sovereign nations, do those nations have some right to capture the wealth produced by their citizens?
Data as Labor
There are two very important market failures that need to be addressed. The first is the failure to pay for data labor. As Jaron Lanier and others have pointed out, producing data is a form of labor that has been broken into such minuscule pieces that all of us who do anything online are providing minute bits of labor to fuel the digital economy. When a reader ‘likes’ this post, s/he has created something of value in the digital economy. Advocates for digital rights have put forward several innovative proposals for how to ensure that ‘data labor’ can be fairly compensated. Some have made the case for piece rates, but this individualistic approach won’t go nearly as far as compensation at the aggregate national level. What’s needed is taxation based on the value of what citizens on aggregate generate in each country.
That is exactly the policy France has just adopted. In June, the country created rules to tax companies for the revenue all this user data is generating. Other governments are considering similar measures to capture and give back to citizens a fair share of the enormous profit that companies enjoy through the sale of data. This is not just happening in Europe. Emerging economies with an abundance of people’s data are also taking action. India is considering a draft e-commerce policy that recognizes ‘community data’ and ‘national data.’ The draft policy takes a clear stance: “The data that is generated in India belongs to Indians.” Brazil’s General Data Protection Law, which will come into effect in 2020, does not go quite as far but will at least lay groundwork for assessing the value of data produced by its citizens.
Data as National Commodity
A second market failure has to do with how the resource itself is used. Data is a renewable resource, but companies do not reinvest it in societies from which it is extracted. This means that potential benefits from the data itself- such as enabling research to protect public health, reduce crime, or improve mobility – are left on the table. Parminder Singh of IT for Change has recently documented efforts even including small LDCs such as Rwanda, which has put in place strong policies to manage publicly-collected data, and attempt to oversee privately collected data through a National Data Office. [1]
The US government’s opposition to any attempt to tax “digital services” is consistent with its opposition to digital sovereignty generally, as Deborah James has noted. Like colonialists of old, the US government hopes to enable its companies to continue vacuuming up this valuable resource from developing countries at no cost – and selling it back not only to commercial enterprises, but to political enterprises as well that increasingly use it to systematically target and shape voter behavior.
Lately, legislators in US Congress have woken up to the ways in which the platform giants may be undermining healthy political systems, not just in the US but around the world. They would do well to consider the long term economic implications of digital colonialism, as well. A better approach to the problem would be for the US to lead the way in collecting a fair share of the resource itself. Consider the possibility of a ‘data tax’: we might insist that the tech giants provide governments with large sets of anonymized data for research purposes. Countries including the US could easily create a ‘data commons’ managed by entities with strict ethical protocols in place, such as the US National Institutes of Health or National Science Foundation, and make it accessible to entities proposing legitimate research for the public good. In fact, the idea of a citizen-controlled data commons is already getting tested in Europe. Expanding this idea could be a golden opportunity to harness an important new commodity to enrich economies and benefit societies.
[1] https://itforchange.net/looking-beyond-privacy-importance-of-economic-rights-to-our-data
