Minister tells Google and Facebook to obey law or be taxed.

The UK Security Minister sent an apparently very odd message to Google and Facebook in a Sunday Times interview on New Year’s Eve, “obey the law or be taxed.

HMRC has a long and dishonourable record of doing dodgy deals with multinationals and their customers . But publicly offering dominant on-line players a choice appears odder than most. At least at first sight.

The real message behind the rhetoric is therefore likely to be very different. Perhaps he was saying  “co-operate with the CONTEST programme or see your corporate tax-planning e-mails published in a Sunday Times special.”

The NSA has no legal power to spy on US Corporations, let alone pass the results to the US Inland Revenue Service but,

we can reasonably envisage some form of global co-operation, not just Anglo-American, let alone “merely” pan-EU.

The Chancellor did not mention co-operation with the EU on tax enforcement. One of the first benefits from “Cuddly Brexit” (Mutual Seduction as opposed to Bear Hug) appears to be the agreement to move negotiation from “Customs Union” and “Tax Harmonisation” (with on-line revenues  routed via the Irish Republic, Luxembourg or the Netherlands to black holes in the Caribbean) to “Tax Alignment” – with no incentive for physical cross border smuggling and UK on-line revenues collected here in the UK. It was only when I looked into the different between harmonisation and alignment that I realised why so many digital lobbyists were desperate to preserve customs “union” as opposed to the long standing open border between Ulster and the rest of Ireland, but not to say why.  Such negotiations will, of course, be complicated by the role of Juncker, (Prime Minister and/or Finance Minister of Luxembourg for most of his political career) but will have the strong support of  most tax-paying member states.

Security and Tax avoidance are two of the areas where we should be offering greater co-operation as part of the Brexit negotiations, with our end of the partnerships firmly under UK law to facilitate effective international, not just pan-EU, enforcement.

We should also commit to enforce the e-Commerce Directive limitations on “innocent carrier status” as part of the Brexit.

The algorithms which enable Facebook and Google to target the adverts you see, according to data they have collected on you, means they are not innocent carriers because they select the receivers of the transmissions.  As part of the “war of the algorithms” they are seeking to better control the material that appears via the programmatic advertising services run by their partners and subsidiaries. That is because have little choice other than to accept responsibility for doing so in , or see their revenues return to those publishers who use humans to edit content. It also, however, means that their responsibilities go much wider.  This has massive implications for their business models and share price. How they handle these will determine their future as potentially long-lived and loved “global utilities” or temporary phenomena, like the US rail-road cartels of the late 19th Century.

I plan to blog some more on the likely effect on the Digital World of “Cuddly Brexit”, the friendly divorce that leads to a life of trading polygamy.