CEPS debate ‘Should we tax the Internet?’

CEPS debate ‘Should we tax the Internet?’

On 26 January, the think tank CEPS (the Center for European Policy Studies) organised a panel debate under the rather provocative heading ‘Should we tax the Internet?’ (although, if you read speeches and interviews of some politicians, the question is probably not so provocative in some circles).

Presentations were made by both academics (one specialised in tax law and the other an IP lawyer), a lobbyist representing the publishers’ perspective and an EU politician:

  • Björn Westberg, Professor, Jonkoping International Business School, Sweden
  • Julia Reda, Member of the European Parliament
  • Francine Cunningham, Executive Director, European Newspaper Publishers’ Association
  • Till Kreutzer, Fellow,, Berlin

Professor Westberg started the whole exercise by looking purely at the feasibility of ‘taxing the Internet’. Not being a tax expert myself, some of the finer points went slightly over my head but I did pick up the following interesting arguments:

  • taxing a sector in an accurate manner and without creating a risk for double taxation, requires a very sound definition of scope that seems to be lacking when looking at concepts such as ‘Internet’ or ‘digital’ or even ‘online’. Ringfencing is just simply impossible.
  • taxing consumption through notably VAT is a better method, even though in some cases, whilst the intention is good, the outcome may not be totally satisfying.
  • multi-national companies, both digital and non-digital, make the most of the existing systems in place which leads to results that many deem unfair.

The discussion however quickly switched to copyright, and more specifically ancillary copyright, with Professor Kreutzer from and IGEL (a C4C signatory) highlighting through his presentation the specific characteristics of the German and Spanish systems and the collateral damage they each induced, namely:

  • in Germany, the main target, i.e. Google (as it is often referred to as the ‘Google tax’), now benefits from a ‘free’ licence to the snippets of newspapers whilst other smaller players do not benefit from similar terms.
  • in Spain, Google News left the market but at this time, this does not seem to have created a space for Spanish or EU players to step into, as certain Spanish news aggregators have either closed shop or announced they are considering re-locating their business to avoid the mandatory licensing scheme with compulsory royalties set in place. It is also unclear how these compulsory royalties affect providers of open content news (e.g. Wikipedia) who actually WANT to share their content for free, and an ironic twist now seems to be that Spanish papers are paying for ad space on search engines so that their content can be found.

Obviously, this view was counterbalanced by the intervention of Ms Francine Cunningham, former journalist now representing the European Newspaper Publishers’ Association (ENPA). Ms Cunningham surprisingly started her intervention by recognising the benefits the Internet had brought to her job and explaining how search engines had made her preparation work as a journalist more efficient and thorough, to then criticize the free-riding practices of certain players benefiting from the content painfully put together by newspapers. So basically, if she used a search engine to do her job and search engines were free riding, I guess she was…?

An intervention by a Google representative during the Q&A pointed out that the 2014 Reuters Institute Digital News Report had come to the conclusion that only about 7% of Internet users used a news aggregators to reach a newspaper, whilst about 20% used a search engine but through a variety of queries. When asked how this fit the claim by Axel Springer in Germany that the removal by Google from Google News of Springers’ snippets under links to their articles had induced a decrease of 40% of traffic coming from Google search and 80% from Google News, it was clarified these 40% and 80% related to the 20 and 7%, hence probably not representing such a massive loss as initially thought. In other words, most internet users read their newspaper by going directly to or rather than through inetrmediairies.

MEP Julia Reda had the honour of concluding the exchange. Whilst agreeing that taxation needed to be improved, she considered that the main failings of the current system resulted from the fragmentation of rules adopted and implemented across the EU, hence resulting in forum-shopping by multi-nationals across the board. More harmonisation and the creation of the right incentives seemed to her the way forward.

She also shared her unease at the idea that the Internet ecosystem would be characterised by ‘free-riding’ models. Indeed, this to her seemed like a shopping center considering that taxi drivers that brought shoppers to them would be ‘free-riding’ on the investment made by the shops. To her, the relation seemed more one of symbiosis, as the fact that one business model would thrive on another one could only be interpreted negatively if the former damaged the latter. She also reflected that initiatives such as ancillary copyright that are focused on targeting one player, end up having unintended consequences and hence should be avoided.

MEP Reda concluded that the EU needed strong pro-competitive measures, including the adoption of the Data Protection Regulation, more tax harmonisation and net neutrality provisions.