A popular trend that is gaining traction in several countries is the introduction of taxes targeting digital services providers such as Uber, Google, and Netflix. The idea is to gain from the revenue that these companies are reaping in their countries.
Such taxes have faced resistance from the companies but the governments imposing the digital taxes view these as global players who are reaping from the economy and not having to pay anything for it.
From the comfort of their offices in Silicon Valley, they launch apps and platforms which generate millions of dollars in revenues but the governments do not get any tax revenues in return.
Spotify, Netflix, Uber, Amazon, Google, Facebook, and other global digital services providers have been accused of advancing a form of digital colonialism, where they make their monies from many places especially in the global South and repatriate the profits to their mother countries. Unlike multinational companies offering physical products, these usually do not pay taxes in most places they operate. Their contract with the users bypasses most government regulations.
This practice has been compared with the colonial trade where European countries would focus on extracting raw materials for their industries from the colonies, then ship manufactured goods back to Africa. The first thing that the British government did with its territory in Kenya was to hand it over to a commercial company - the British East Africa Company – to administer the region.
The end result was a case where colonial powers benefited and chances for industries growing in the colonies dwindled. It was the reason why Britain had a commercial company running Kenya initially. It was business.
Although Big Tech companies benefit from operating globally and may not even pay taxes, it is not correct to say that they are the only ones who benefit. They get a bigger share of the cake, but other players in the local economies get to benefit.
A case of advertising revenues
Media companies in Kenya has been facing a decline in fortunes as advertisers shift to digital platforms which are cheaper and more efficient. With this, jobs and revenue have been lost to major global players like Google.
Whereas the income earned by media was taxed locally and created jobs in Kenya, the bulk of the profits generated by digital advertising companies go to the parent countries of these companies. Even the possible jobs that could be associated with the new ads do not benefit the Kenyan economy.
For example, Facebook offers support from Nigeria while Google offers the same from India. This means that there are little direct benefits in terms of jobs and skills.
However, as local mainstream media suffers, other players are benefitting. These include people who could not afford to advertise on the expensive media but can now effectively utilize online ads even with limited budgets. Others have formed advertising companies to focus on helping people advertise online and they have built new businesses across that.
The picture here shows that it is not a case where everybody loses, although major industries are disrupted. Unfortunately, governments feel the pinch because that is where their money is. This is why they have to come up with a set of new tax measures.
This trend will continue as long as businesses exist. The way to prepare for the future is to prepare for the disruptions.
Avoiding disruptions in the future
Technology can easily exasperate existing inequalities. The next Big Tech company will most likely come from wealthy countries and if not, those countries will have to play a major role in building it. The next Google will likely be largely owned by the same investors who own the current Google. In the end, developing countries could end up feeling like they are getting the crumbs while others are eating cake.
What can be done to change the situation?
For the developing world to have a chance, it will take more than luck, and there are no short-term solutions. It will involve having a bigger voice in world affairs so that no single business player will emerge and have unfair dominance over other some countries. It will involve creating a good playing field where local companies will not be disadvantaged due to barriers brought by legislation or other factors.
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