Germany plans to tax Google, Facebook

Germany’s Culture Ministry is planning to bring a law to tax the American online giants like Alphabet of Google and Meta of Facebook. The rate of taxation is to be 10 per cent.

The grounds on which taxation is to be imposed are interesting and even new. German Culture Minister Wolfram Weimer told the magazine, Stern, “These corporations do billions in business in Germany with extremely high profit margins and benefit enormously from the country’s media and cultural output as well as its infrastructure – but they pay hardly any taxes, invest too little, and give far too little back to the country.”

There is more than an element of truth in Weimer’s statement. Google and Facebook thrive much from the media content that populates their platforms, which is one of the reasons that millions of Net users throng them, to get the news in a jiffy as it were. Both Google and Facebook do not create an iota of their own content. They thrive on what they take from others, either directly or through their own users.

Australia overcame the problem by giving in to the demand of newspapers and other old media, that Google should pay them for using their content. Weimer is stating the fact that the online platforms are using cultural output of the country – whether it be music, films, art – and they do not do anything to sustain the cultural events.

Similarly, the Internet penetration in the country and the infrastructure that sustains it is what enables millions of Germans to use Google and Facebook, and it is on the large number of users that these online companies earn their revenues. It is but reasonable that the online companies should be made to pay taxes of some kind. Weimer has even suggested voluntary contribution on the part of Google and Facebook. But this may be impracticable. No company will be willing to make voluntary contribution in lieu of taxes.

The American online platforms have an advantage over national players because they have worldwide footprint because of the investments they made in the search engines reaching the ends of the globe as it were. They are indeed reaping benefits from it. But do they have an obligation to the regions and countries in which they operate?

Google and Facebook can argue that they have built the cyber bridges to connect the different places, and they are allowing a free use of it. The owners of these platforms would not let these sites remain free if they were not earning enough revenue in billions of dollars. If they did not make money, they would have imposed some user-charges from the thousands of millions who use them around the globe. They can say that they have boosted other businesses through the space they have opened up for other businesses.

These arguments do not however discredit the demand for tax payments from national governments. That these online payers use national airwaves is a fact. It can be argued that it is the telecom companies in these countries which have the right to charge these companies. But the search engines with enormous Cloud or memory power which sustain these platforms do cost enough money, but the revenue generated by advertisers outstrips the investment and costs of maintenance.

National governments have a legitimate right to demand tax from the online platforms because they operate within the sovereign territory of a country. Facebook and the Google do not have the solidity of an iPhone, but they are at the same time cyber-products. They can be treated as taxable products or services. The rate of taxation should remain flexible enough so that the thriving business of connecting people is not affected or dampened.