UK doubles down on White House irritation with digital sales tax

With the UK already testing the strain on its special relationship with the US following the Huawei decision, the introduction of a 2% digital sales tax is hardly going to help matters.

Although the introduction of such a tax has been in the works for some time, the timing could be better. It will certainly aid the UK Government, just as it announces expensive support measures for SMEs in the 2020 Budget statement, but the easily irritated US President might have a thing or two to say in response.

The new digital sales tax was not mentioned during Chancellor Rishi Sunak statements today, but there was plenty of reason for the UK Government to want to secure additional tax revenues. A £5 billion emergency fund will be offered to the NHS, a £500 million hardship fund will be created for councils in England and business rates in England will be abolished for firms in the retail, leisure and hospitality sectors.

The two are of course not related, the UK would have most likely pursued the digital sales without the extra expense associated with the coronavirus outbreak. From April 1, firms where revenues exceed £500 million worldwide, £25 million of which would have to derive from the UK, and operate either a social media, search engine or online marketplace service will be subject to the 2% digital sales tax.

And while the US Government might protest to such a prospect, it is of course very fair and reasonable. Tax laws were created for the analogue era, meaning many digital businesses today can bend around the rules, derive value from their interaction and engagement with a user base but shifting tax responsibilities to a more favourable market. It leaves some Governments out of pocket for no other reason than legal loopholes and creative accounts finding work arounds.

While it is perfectly logical for a company to pay taxes in the country where it creates value and profit for itself, President Donald Trump has been a very vocal opponent. According to the Commander in Chief, this is an attempt to raid the successful US economy. When you add the digital sales tax to the Supply Chain Review conclusion, the UK/US trade talks might be somewhat of a tense occasion.

The last time UK and US representatives faced-off over the concept of a digital sales tax at the World Economic Forum in Davos, Steven Mnuchin, the US of the Treasury, suggested it was a discriminatory tax directed towards the digital fortunes of the US. Mnuchin even went as far as to suggest there would be a retaliation from the US.

The UK is of course not alone in its pursuit of a fair and reasonable tax system, designed for the 21st century. France has introduced its own 3% digital sales tax, as has Italy. In response, the US has been targeting French cheese and fashion for trade tariffs, while it would surprise few to see something similar levied towards the Italians.

Although Silicon Valley will feel the pinch of the new sales tax more than anyone else, perhaps the US politicians need to appreciate this is not an act of aggression towards the country. It the statements of opposition, the US feels it is a victim of European bureaucratic oppression, but it is not. This is not a tax directed towards US digital companies, but towards the tax dodgers in the digital economy, some of whom are headquartered in the US.

These companies are a victim of their own success and shadiness. If the tax avoidance was not done to such an extreme level, these governments probably wouldn’t feel the need to pursue so aggressively. Instead, these companies, who could be based anywhere around the world, wanted to have their cake and eat it. That’s not how the real-world works, eventually it catches up, just like it has done so here.

Verizon attempts to muscle in on Google’s search quasi-monopoly

Verizon has announced the launch of OneSearch, a privacy-focused search engine which promises not to share user data with third-parties.

Google’s dominance of the search engine segment was arguably cemented when the verb ‘google’ was entered into the Oxford English Dictionary on June 15, 2006. The vast majority of people would not even consider using an alternative, such is the effectiveness of the algorithm and the savviness of Google in distributing the platform across all access points.

However, Verizon is now attempting to lure customers away from the market-dominant search engine with OneSearch.

“We deeply believe in consumer trust and choice, both for our user community and our partners,” said Michael Albers, Head of Consumer Product at Verizon Media.

“In support of our commitment to trust and transparency, we are excited to launch OneSearch, an innovative new online search experience built for privacy-minded searchers. With it, you can search the internet with increased confidence, knowing your personal and search data isn’t being tracked, stored, or shared with advertisers.”

It is an interesting approach, one which would severely dent the overall revenues in the search engine segment should it be successful. Ads would be served to customers based on the context of the search as opposed to any profiles built on the user, making them less accurate. With less-accuracy being offered to advertisers, Verizon will not be able to charge as much.

This is not to say ads would not be accurate, but it is a downgrade on the hyper-targeted advertising model which has brought Google so much success over the years.

For example, if you were to search for ‘flights to Paris’, OneSearch would serve ads for booking agents who can help. Google might go one step further however, knowing that the user has a preference for premium airlines, travelling in limousines or staying in Boutique hotels with a gym and mini-bar. Immediately, the number of potential customers is expanded to airlines who fly to France, car services around the airport and hotels in the city.

The more forensic the targeting is, the more likely there is to be success and the more advertisers are likely to pay.

What is worth noting is that Verizon faces an uphill battle to secure market share. Not only does it have to counter consumer behaviour, it has to combat the fact Google is the default search engine on desktops, Android-powered mobile devices and various IOT devices which have been launched. It will also have to prove it is better than Google.

This is something which is often forgotten about the Google search engine. The management team might have made some very good acquisitions and deals to ensure Google is presented to users as default, but it originally found success because it was a better service than anything else on the market. That arguably remains a true statement today.

Googlers start hitting back at censored search engine

Google employees around the world are starting to remember what the ‘Don’t be Evil’ motto actually means, and the controversial Project Dragonfly is next on the radar.

During the summer, leaked plans suggested Google was developing a news-aggregation app for use in China which will comply to the governments strict censorship rules. The leak turned out to be true and Google became the latest internet giant to sacrifice principles in pursuit of the bonanza of cash hidden behind the Great Firewall of China.

However, a team of Googlers are not going to sit back and watch the admired brand be dragged down.

“We are Google employees and we join Amnesty International in calling on Google to cancel project Dragonfly, Google’s effort to create a censored search engine for the Chinese market that enables state surveillance,” a small group of Google employees wrote on Medium.

“We are among thousands of employees who have raised our voices for months. International human rights organizations and investigative reporters have also sounded the alarm, emphasizing serious human rights concerns and repeatedly calling on Google to cancel the project. So far, our leadership’s response has been unsatisfactory.”

The original letter was signed by 11 employees, though the list is being updated as and when more join via an internal petition. And just to be clear, this is not a direct criticism of China and its abuse of basic freedoms, but in Google aiding the state with its advanced technologies.

According to the letter, surveillance and the suppression of an individual’s right to freedom is increasingly being done through the implementation of next-generation technologies. We’ve heard numerous stories come out of China regarding facial recognition, and this is where the Googlers seemingly want to draw the line. This isn’t about directly stopping an oppressive country, but preventing one of the US’ most powerful companies, one which is supposed to have democratic values, aiding the government in its nefarious mission.

This is of course not the first time the Googlers have been active on humanitarian grounds. Two of the original 11 signatories were organizers of the recent walk out, and employee outrage eventually led to the end of the controversial Project Maven, an initiative which saw Google’s technology aid the US government to increase the accuracy of drone strikes. This project was one which certainly had repercussions, as it is rumoured CEO Sundar Pichai and former cloud boss Dianne Greene disagreed on whether to bow to employees. It supposedly created a rift between the two which was never fixed.

Just like Google employees do not want to oil the gears of war and death, they do not want to help create Big Brother states.

“The Chinese government certainly isn’t alone in its readiness to stifle freedom of expression, and to use surveillance to repress dissent,” the letter states. “Dragonfly in China would establish a dangerous precedent at a volatile political moment, one that would make it harder for Google to deny other countries similar concessions.”

China is a conundrum for many of the internet giants. It presents a huge opportunity for growth, with an untapped, digitally-savvy population, though the table stakes are considerable. For any company to operate in the country, it would have to adhere to strict rules, some of which would make level-headed and reasonable people cringe. Google is not alone in bowing to the Chinese government, LinkedIn folded and Uber made concessions.

Google has always sold itself as a friendly, approachable brand, which has been built for the people. This purpose might have been forgotten as the ‘Don’t be Evil’ motto was dropped, but there are at least some Googlers who are holding the management team accountable.