Big Techs should be taxed on advertising revenue

All jurisdictions, including Mexico, should start thinking about a proposal where a tax is imposed on the income that companies like Facebook or Google receive from advertising companies that are paying them to show their ads on the Internet, said Paul Romer, Nobel laureate of Economy 2018.

“You have to put taxes on companies that show advertisements for the population of a certain country. The tax must be progressive so that it is much higher for the giants that now control the technology industry (Google and Facebook) ”, commented Romer during the DG1TAL Meeting organized by the Mexican Association of Afores (Amafore).

He specified that Google and Facebook are the two companies that charge the most money for advertising in the United States.

That is why with a 30% advertising revenue tax they would pay between $ 14 billion and $ 20 billion a year in the country of the stars and stripes.

“The income from this tax would be substantial. Think about what could be done with this money. Just think about the relationship of the Gross Domestic Product with that of another country and make the adjustment of what Facebook and Google are charging in advertising and you will realize how much they are obtaining in another country for advertising revenue, “commented during his speech the Nobel winner.

In 2020 alone, Google had a profit of $ 182.527 million. While, Facebook had profits of 84.169 million dollars, according to their respective quarterly reports.

Similarly, Amazon and Microsoft would pay a tax, outside of them the other companies would not pay anything because they would fall below the tax threshold, according to Romer.

While the idea of ​​each nation imposing this advertising tax is to generate revenue, it is also for companies like Google and Facebook to get out of the dangerous business model of advertising.

Advertising can cause great damage

The New York University professor specified that the manipulation of information through advertising campaigns on digital platforms can be dangerous.

“Advertising on the Internet is a model that can cause great damage and can be a very big threat especially when it is used to interfere in a political campaign,” he warned.

One example was Cambridge Analytica meddling with UK Facebook users to deter the intention of voting in favor of Brexit in June 2016, with all the consequences that this has entailed.

In this vein, he commented that Google being “the dominant player” offers the potential for manipulation because it observes what others are seeing.

“You can control what I see, what I hear, what I think and what I consume. This is very dangerous for any company to have it ”, he pointed out.

Despite everything, progress is possible

Given this, he called for innovation if everyone wants to have the same opportunity in the future to be in better conditions.

“Progress is possible only if there is a market economy of innovation, for example, in the case of retirement support companies (Afores) that operate in Mexico and that the government establishes the regulatory framework of the market”, allows a healthy competition between them.

santiago.renteria@eleconomista.mx