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Tradewars 2020

5 December 2019

Many countries, including New Zealand, have been mooting the prospect of a digital tax.

No, I'm not talking about attempts to force overseas e-tailers to add GST to purchases made by NZ consumers, I'm talking about the imposition of a turnover-tax on revenues generated by large offshore corporations.

Clever, legal (but dubious) strategies by the likes of Google, Facebook, Apple and other hi-tech players have deprived many countries of tax that they would otherwise have been paid.

Such companies often use "careful accounting" to effectively move their profits out of hi-tax countries where they are earned, back to countries with much lower rates of taxation.

The solution, according to France, New Zealand and now Britain, is to simply impose a small tax on the total volume of sales made. A figure of 2 percent is what's usually suggested.

Trump is not pleased with this... very not pleased.

Speaking in response to Boris Johnson's suggestion of a 2% digital tax which would affect quite a few US companies selling into the UK, the president made it very clear that his country would retaliate if this was to happen.

And thus, the third decade of the 21st century looks set to kick off with a pretty interesting trade war.

When France announced a 3% digital tax, the USA responded by threatening import taxes of up to 100% on popular French products such as Champagne, handbags, cheese and such and no doubt similar taxes would be added to UK imports, should Johnson become UK PM and push through his plans.

Will NZ also face sanctions like this if we go ahead with our proposal to impose a digital services tax like France?

And in other news...

YouTube has been sending out emails to some of its monetized creators advising them that it will now be deducting withholding tax from their payments.

Yep, that's right... even though the US government thinks it's unfair for foreign governments to tax its big corporations, it also believes that foreigners who earn money via those big corporations should pay some of it to Uncle Sam.

For those living in countries (like NZ) which have reciprocal tax treaties with the USA this isn't really much of a problem. For example, if Google deducts tax from my YouTube earnings I can claim that payment as a credit towards the tax I pay to the IRD here.

No big deal.

However, for those living in countries without such an arrangement, things get a whole lot messier and it's unclear whether they'll be able to apply to the IRS for a refund or whether the US government will simply pocket the money.

I guess one can't blame YouTube for this latest imposition on monetized creators, they are simply complying with the diktats of the IRS however, it is just anther straw on the back of an already greatly overloaded camel and I feel that at some point very soon, very big and bad things are going to happen at YouTube in respect to its dominance of the streaming of user-generated video content market.

Perhaps the "final straw" will be what was effectively an admission by YouTube's CEO that they are indeed a curating publisher and not an agnostic "platform" or "carrier".

Lawyer (now vlogger) Viva Frei made this tweet in which he highlighted Susan Wojcicki's apparent admission.

Why is this important?

Well "platforms" or "carriers" have indemnity against being held accountable for the content they carry -- just like NZ Post can't be prosecuted for unknowingly transporting illegal substances inside packages that are sent through their system.

By admitting that YouTube is actually a publisher, Susan has opened up the platform to liability for the actions of its uploaders. If I were to upload a video defaming someone then not only I but also YouTube would (in theory) now be liable for damages because (according to Susan) they are a publisher, not a platform.

To date, YouTube has really only been able to avoid huge law suits because of its claim to be a platform (and therefore immune to prosecution). This admission may well change all that.

So... as we turn the corner into 2020, things are looking kind of interesting in a number of areas relating to the internet and those who work and play on it.

Oh, and by the way, NONE of the overseas websites I buy from seem to have bothered complying with the NZ Government's diktat to start charging GST.

Am I surprised?

No.

Are you?

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