Highlighting the difficulty both public and private establishments can have when it comes to adapting methods in the digital age, it was reported Monday that one government is now trying to tax search giant Google and social media companies.
From a report by Bloomberg:
“Austria is seeking ways to make digital services like Alphabet Inc.’s Google or Facebook Inc. pay taxes for transactions with the nation’s internet users, trying to plug gaps in a tax system still designed for brick-and-mortar business.”
Continuing, Bloomberg explains something most people don’t stop to consider: how social media actually functions, and at no monetary cost to users:
“The most ambitious part of the plan targets the business models of Twitter Inc., Google or Facebook:
The tacit pact under which searching, liking, posting and tweeting remains free as long as users let the companies feed usage data into algorithms that help tailor advertising that can be aimed at the most likely buyers.”
Since this arrangement is a form of bartering, the Austrian government argues, a value-added tax can be applied, just as in other sectors of the economy.
“The business transaction that’s going on here is that users are paying with their personal data,” the parliamentary head of the governing coalition, Andreas Schieder, told journalists in Vienna.
“The business model of those internet companies is based on massive revenues that are generated with the help of those data.”
The government’s plan would include extending the general advertising tax to cover digital services, and it would also place a tax on purely digital services Austrians purchase from businesses with no physical location.
“We need a new approach to make sure that taxes are paid where revenue and profit is made,” Schieder said, adding that the government’s plan is comprised of “practical suggestions (on) how to define digital establishments for tax purposes.”
The proposals, according to Bloomberg, now need the approval of a single man, Finance Minister Hans Joerg Schelling.