Regulators in different countries are now busy ensuring that the Big Tech firms are more accountable for the data they own or access. The General Data Protection Regulation in the European Union became enforceable in 2018, and it became a model in various countries across the world. A parliamentary panel was looking at the Personal Data Protection Bill in India. In between, there is speculation that China may be mulling the idea of imposing a 'data tax' on internet giants, which could be used to finance President Xi Jinping's "common prosperity" drive that aims to share wealth more equitably throughout the nation. It might also want to push antitrust measures so that internet firms no longer dominate big data markets.
Former Chongqing mayor Huang Qifan suggested such a 'data tax' in his speech in a Shanghai forum on October 24: "Platforms that own a large amount of personal data should return 20-30 per cent of the revenue they obtained from data transactions to the 'data producers'." It might be interesting to note that the city of Shanghai released a draft ordinance in September: "Individuals, as well as corporations, have the right to benefit from the revenues generated by data transactions."
'Data' is the buzzword in today's world, society and businesses. People aim to use loads of data in planning for healthcare, education, politics, sports and whatnot. Back in 2006, British mathematician and data science entrepreneur Clive Humby coined the phrase: "Data is the new oil," which has become extremely popular since then. Still, does a 'data tax' sound a bit weird? Does it follow the four principles of taxation, namely, fairness, certainty, convenience and efficiency, as outlined in Adam Smith's 1776 book The Wealth of Nations? What is the value added when users are not customers of a platform but whose transaction data is being harvested for profit? Well, it might not be completely irrelevant to note that Shanghai just opened data exchanges to trade it as an asset class.
The idea of taxing Big Tech firms for their access to our data is not alien though. A 2015 research article titled 'Google search activity data and breaking trends' by Nikolaos Askitas and published in IZA World of Labor proposed: "...governments will have to encourage or even legislate for some kind of corporate good practice (for example, in the form of a data tax) to motivate firms with large amounts of data in their proprietary silos to open up the information in aggregate form for the benefit of society, while also protecting their legitimate corporate interests and privacy concerns."
In 2017, then German Chancellor Angela Merkel and the leader of the German Social Democratic Party Andrea Nahles mentioned planned reforms to tax big data. Nahles proposed a 'data-for-all legislation' to force a digital firm to open "an anonymised, representative sample of their data" as soon as "the firm's market share exceeds a certain limit for a certain amount of time". In the same year, the Rockefeller Foundation's Saadia Madsbjerg wrote in The New York Times: "Consider your data as something real and physical, like a car… [that] moves around a real, physical infrastructure… owned and operated by the internet providers."
About three years ago, then California Governor Gavin Newsom also floated the idea of a 'data dividend', saying that "consumers should also be able to share in the wealth that is created from their data." However, New York Assemblyman Ron Kim opposed the idea. "If we take this route, we're actually validating the extractive and abusive practice by tech companies," said Kim.
The 2020 American docudrama film The Social Dilemma also floated this question. In the film, a former Google employee says: "We could tax data collection and processing the same way that you, for example, pay your water bill by monitoring the amount of water that you use. You tax these companies on the data assets that they have."
Thus, this new Chinese proposal is not all novel in terms of its imagination. What remains to be seen is its implementation. And how would the tech companies react? In China, the shares of internet giants including Tencent and Alibaba slumped when the statement of Huang Qifan broke in the media. Some think that small internet companies would support the launch of a 'data tax' as it could help break the monopoly of tech giants. Of course, there will be concerns of double taxation as internet companies already pay business or profit tax.
While drawing the analogue of oil to data, Clive Humby emphasised, "It [unrefined oil] has to be changed into gas, plastic, chemicals, etc., to create a valuable entity that drives profitable activity; so must data be broken down, analysed for it to have value." As we observe, the world is now obsessed with collecting data and trying to frame business strategies by using big data analytics. The coffee shop or the superstore near my house always asks for my phone number whenever I purchase from there. However, can they really get the maximum out of this huge data? I always have enough doubt. Big data analytics is still in its infancy, let's be honest. And many Big Tech firms already have much more data than they can leverage. The former Google employee in the documentary The Social Dilemma thinks that the 'data tax' gives the companies "a fiscal reason to not acquire every piece of data on the planet". Who knows, maybe next time they'll not ask for my mobile number when I buy a cup of coffee.
(The writer is a professor of Statistics, Indian Statistical Institute, Kolkata and can be contacted at appubabale@gmail.com)