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OPINION: The recently announced $ 50 million grant package by the New Zealand government to support local media was necessary and urgent, even if it was too late to prevent Bauer magazine titles from closing.
But the government’s cash injection did not address the underlying cause of the New Zealand media decline, which predates the Covid-19 pandemic.
While the Internet has created new opportunities for the media and the public, those opportunities have come at a price. Traditional media organizations now compete with giant digital platforms, not only for readers’ attention, but also for the ad revenue that was once their soul.
Adding insult to injury, digital platforms compete for public attention in part by distributing the news content that was first created and published by the media organizations that are now struggling.
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This not only damages the media and public discourse, it is detrimental to taxpayers.
A carefully designed digital service tax (DST) could correct the balance and help level the playing field for New Zealand media. Such a tax would compensate New Zealand for lost revenue by not taxing the profits of nonresident tech giants operating on its territory.
Rules that force the likes of Google and Facebook to compensate the creators of the media content they carry, as introduced in Australia, could also be helpful. Both options could be implemented quickly if the political will existed.
AMR ALFIKY / AP
The New Zealand Internet advertising services market is dominated by two multinationals: Google and Facebook, but they pay very little tax.
THE CHALLENGE OF TAXES TO TECHNOLOGICAL GIANTS
The New Zealand Internet advertising services market is dominated by two multinationals: Google and Facebook. Unlike the local media, these giants do not pay income taxes in New Zealand in proportion to their local advertising revenue.
In 2015, Google, Facebook, and Amazon accounted for 69 percent of digital advertising revenue outside of China. By 2018, its share had increased to 86 percent. But this growing share of global advertising revenue does not correspond to the income tax these companies pay in New Zealand.
Due to the complex way digital giants report their finances, New Zealanders are left guessing how much advertising revenue they generate. And yet, just across Tasmania, the Australian Competition and Consumer Commission (ACCC), the equivalent of the New Zealand Trade Commission, has forced Google and Facebook to disclose their Australia-specific ad revenue for 2018.
Paris (AFP) – French police search the Paris offices of US internet giant Google as part of a tax fraud investigation, a police source said.
The ACCC estimates that Google generated around A $ 3.7 billion (NZ $ 3.9 billion) from ads placed on its own search pages and on third-party websites. Facebook’s advertising revenue was around A $ 1.7 billion (NZ $ 1.8 billion).
Based on these data and the similarities between Australia and New Zealand, it is reasonable to conclude that in 2018 Google could have earned around NZ $ 720 million in New Zealand, and Facebook around NZ $ 349 million just from targeted advertising.
A DISPROPORTIONALLY SMALL TAX TAKE
Changes in reporting standards [made in 2014] means that Facebook is not required to file financial statements in New Zealand, so your 2018 tax bill is not public information. In 2018 Google NZ Ltd (an entity of the Alphabet group) paid an income tax of NZ $ 398,341, about 0.055 percent of the estimated gross advertising revenue “drawn” from the New Zealand market.
In Australia, Google paid income tax A $ 26.5 million in 2018 (and at a minimum amount), meaning Google New Zealand paid 66.5 times less income tax than its Australian equivalent during the same period. Given that New Zealand’s economy is about a seventh the size of Australia’s, this is an extremely wide disparity.
New Zealand has been reluctant to unilaterally adopt daylight saving time, possibly to avoid conflicts with the United States. However, with many OECD members introducing daylight saving time, including France, Italy and the UK, it is difficult to justify further delays. The more countries establish daylight saving time, the more costly it will be for the United States to retaliate.
The New Zealand government has said it prefers “an internationally agreed solution through the OECD” to the fiscal challenges of digitization. The OECD agreed to find a “solution” by the end of 2020.
With the growing tensions between Europe and the US. USA On taxes on highly digitized multinational companies, that deadline seems less and less realistic.
NZ CAN’T GO ALONE
The Covid-19 pandemic has further slowed the process. The delay favors the tech giants, but not New Zealand and the other countries where they operate and pay little tax. These countries need to move quickly to stop the erosion of their tax bases.
New Zealand is unlikely to move without Australia on board, but Australia now appears to be more interested in other mechanisms to correct its relationship with global tech giants.
The ACCC is developing a mandatory code of competitive conduct that will require Google and Facebook to pay the media for the use of their content. There are similar developments in France.
These codes point to anti-competitive conduct, while daylight saving time implies compensation for the loss of income caused by outdated international tax rules. To some extent, daylight saving time is a charge for the dominant market position of multinational digital service companies.
The ACCC code is not a substitute for a digital services tax, but New Zealand could do worse than consider a similar scheme. In the end, it will take both a DST and a forced payment for content if New Zealand wants its local media to survive, let alone prosper, and not just at the expense of taxpayers.
Victoria Plekhanova is a professor at Massey University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
