Digital Service Taxes are like...

Posted 3 years, 5 months ago | Originally written on 5 Jan 2021

Photo by Robert Gourley on Unsplash

...taxing the unknown person at the other end of the line.

They should apply equally to all kinds of consultants, physicians, experts etc ... anyone who willingly picks up the phone and charges a fee for a response.

The term 'digital service' is actually a misnomer. In effect, DST applies for any chargeable information service i.e. a transaction where the product is information. It is actually an information content tax because the tax only applies to chargeable information content. The only way that such a tax can be operational is if the taxing authority gains insight into the communication between the parties involved, which would be in the direction of violating privacy.

Furthermore, once we expose it as an information content tax it follows that there is little stopping the taxing authority from applying the same to phone conversations (ergo more privacy violations). Hence the above claim: anyone who conducts service business over the phone will be liable for such taxes.

It will not be long before such a taxing authority will attempt to define an information boundary in line with its physical boundary so as to have access to all information transactions with its citizens.

I think it's also fair to say that the calls for taxation of digital services (chargeable information content - particularly that provided without in-country presence) stems from sour grapes; taxing authorities want a piece of the action without realising that they have long been beneficiaries of technologies that they have never had to invest in. It will be foolish and retrogressive to define the Internet as being geographically bound i.e. each country will have its own Internet with Internet exchanges operating with government oversight. It's too late for that; we're shutting the stables after the horses have bolted. The value of the Internet is its lack of a geographic boundary.

In my opinion, it makes more sense and is practical to tax Internet consumption rather than the content itself. It would also be helpful to facilitate establishing local content sources, which will better fall within the tax remit of the authority. Otherwise, information content taxes (aka digital service taxes) are only going to lead to ugly trade wars.