The bill would levy a new tax on ad sales based on the revenue a company generates, ranging from 2.5 percent to 10 percent. A company that generates US$100 million to $1 billion a year in global revenue will be taxed 2.5 percent on its ads. Companies that make more than $15 billion a year will pay a 10 percent tax.

MDAGRT was passed for at least two reasons. First, like other states, Maryland’s yawning budget deficit as a result of the pandemic has forced it to seek new sources of revenue to finance education, health and basic infrastructure to help the vaccination effort. It is no secret that states have an interest in getting a bigger chunk of tech giants’ prosperity.

Second, according to The New York Times, Maryland legislators said they were inspired by an op-ed from the economist and 2018 Nobel laureate, Paul Romer, proposing taxing targeted ads to urge tech companies to change their business models. Tech giants are said to collect personal data, monetize it and earn billions of dollars on it, but they pay nothing for its use.

North Dakota, too, has an agenda for tech giants, especially Google and Apple, although it does not involve a new tax. States dominated by Republicans, including North Dakota, are generally pro-business and pro-deregulation. The state is instead concerned about the high fee – up to 30 percent – imposed by Google and Apple on app developers on their app sales. Proponents of this bill claim these practices hurt small businesses and that such a law could attract certain tech companies to their state.

In Australia, a new battlefield has formed around tech giants and media corporations after Australian legislators proposed a bill to allow news publishers, both individually and collectively, to negotiate compensation for every news piece shared or distributed on their platforms. It is no secret that tech giants such as Facebook and Google receive billions of dollars in revenue from digital ads related to news content that does not belong to them, angering the media companies that own it. According to a report cited by CNA, every A$100 spent on digital advertising, Google takes A$53 and Facebook makes A$28.

Google and Facebook are pushing back against the bill and are threatening to prevent Australian people and their media companies from sharing links of news content on their social networks. They say news publishers gain from increased user traffic as a result of the sharing. But in recent weeks, Google and Facebook have seemed to diverge on how they are facing the regulatory future. Google struck a deal with media companies such as Reuters, The Financial Times and News Corp and has agreed to pay for news content. Facebook, on the other hand, remains harsh and has now begun to remove news from its platform in Australia.

What is going on in Maryland, North Dakota and Australia sets new precedents for the internet industry. If these bills prevail, other countries will have similar opportunities because tech giants’ problems are ubiquitous. So how about Indonesia? Our approach to this kind of taxation remains benign but without a clear strategy on how to face it in case countries around the world fail to meet the global consensus. These three new battlegrounds should be used as an impetus to tax the global tech giants, both directly and indirectly.

First, in terms of MDAGRT, tech giants will fight against it because it is not a consumption tax like what Indonesia imposed on its consumers. It is an income tax, although critics say the tax will lead to higher prices for small businesses. To level the playing field, the tax should not only be levied on consumers but also tech giants or at least the advertisers.

Second, what North Dakota proposes has nothing to do with taxation. But, it can be a tool to help start-ups flourish. Taxing businesses based in Indonesia, for example, will be much easier because there will be no barrier or interference from external parties. We can do it by helping small businesses compel Apple and Google to cut their high fees so more resources can be utilized by our domestic taxpayers. The faster the growth of small businesses, the larger the profits of domestic companies, which can create more jobs.

Third, what has infuriated Australians is actually the same problem encountered by media organizations in Indonesia. Over the years, digital ads have been inundating tech giants with tons of money, even though they do not own any news content on the network. If taxing tech giants directly is a hard thing to do, why don’t we try to cooperate with domestic media companies to pursue compensation for news content shared on their social networks?

The second and third points are an astute strategy that can be adopted to shift the wealth of the internet industry elsewhere to our country. This will make taxing this industry much easier. Not only would it become our main issue in policy making, it would also encourage the government to collaborate with media companies or other parties with the same grievance about the hegemony of internet giants.

The idea of shifting that kind of wealth to the domestic market and then taxing the beneficiaries, i.e. domestic taxpayers, with the existing tax bill will be more realistic to implement devoid of multilateral consensus.

 ***

The writer works for the Directorate General of Taxes. The views expressed are personal.

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