A body representing the US’ large tech firms has branded the news bargaining incentive “highly unprincipled and coercive” and warned the update to the legislation could deter foreign investment in Australia.
In a letter sent to the Treasury, the US’ National Foreign Trade Council (NFTC) whose members include Meta and Google, said detailed what it believes to be a number of flaws in the legislation.
The new proposal would place a 2.25 per cent tax on the Australian revenues of Google, Meta and TikTok unless they negotiate deals with publishers worth 1.5 per cent of their turnover. The money provided to publishers would be tax deductible.
“Placing the onus for the commercial viability of Australian journalism on a handful of foreign companies due to evolving media consumption patterns is a flawed premise,” wrote Tiffany Smith, NFTC’s VP of global trade policy.
Smith continued to say that the proposal does not meet the government’s intentions as it lumps revenue attributed from sources other than news publishing—such as cloud services and hardware sales—under the taxable burden.
“This clearly demonstrates the highly unprincipled and coercive nature of the tax,” read the letter.
That said, most of the large tech companies ship significant portions of their revenues overseas before the taxman get at it.
The tech platforms have previously had their own say on the proposed changes.
Just this week Netflix, which is not subject to the News Bargaining Code, sent 92 per cent of its AU$1.47 billion Australian revenue overseas.
Google and Meta have form for this, too.
In April, Meta sent 87 per cent of its Australian revenue overseas and only revenue from advertisers serviced by Meta’s local teams is subject to Australian tax. The rest of the revenue is classed as a “distribution fee” for the overseas parent company.
To be clear, this is not illegal and B&T is not implying that Netflix, or other companies, have done anything wrong.
But B&T does wonder whether the offshoring of Australian revenue by the tech platforms is more likely to fail the pub test than the News Bargaining Incentive.
The NFCT added that the proposed changes creates a “disincentive” for “future digital platform investment and growth in Australia”.
“Platforms that innovate and scale their services would be rewarded with a 2.25 per cent tax on their Australian revenue. This creates a disincentive to invest, expand, or launch new products in Australia, particularly for social media and search platforms that do not host news content and would nevertheless be saddled with a levy without deriving any corresponding commercial benefit,” the letter said.
Read more: America First, Unless It’s Big Tech: Why Australia’s Policy Hit A Nerve
Again, recent history might suggest this not to be true. Last month, OpenAI, parent company of ChatGPT, launched its advertising service in Australia. ChatGPT does not necessarily host news content, though it does surface content from news publishers in its service. It’s why News Corp signed a global deal with OpenAI last year.
In fact, new research from Telsyte found that ChatGPT has the dominant market position in Australia, with 13.8 million in the last year.
Regardless, US opposition to the proposal and the previous News Bargaining Code legislation is well known. A communique from the White House last month branded the proposal “foreign extortion”.
“Australia’s insistence in moving ahead with this proposal is deeply troubling,” read the NFTC’s letter.
“The draft bill is only one element in a broader trend of a deteriorating tax environment in Australia. By targeting foreign companies to sustain domestic Australian industries and penalising scale, growth, and innovation, the tax sends a negative signal to global investors considering Australia as a destination for digital infrastructure and technology investment. At a time when Australia faces productivity challenges and seeks to attract capital to support digital transformation, this policy introduces unnecessary risk and sets a troubling global precedent,” the letter concluded.
