Photo by Shahadat Rahman ()

Tiffany Wang is an��IPilogue��Writer,��Intellectual Property Journal Editor, and a 2L JD Candidate at Osgoode Hall Law School.��

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Through accelerating digitalisation, the pandemic has vaulted taxation to the forefront of the global political and economic system. The Organisation for Economic Co-operation and Development (“OECD”) commenced public consultations in January to . The growth of multinational enterprises (“MNEs”), particularly digital corporations, enervates the current global corporate tax system, and the OECD opines that a (“GDP”). Two proposals, Pillar One and Pillar Two, seek to address this quagmire.

jurisdiction. (currently agreed at ). , . The endorsed package has .

Digitalisation pares back the integrity of tax structures. Tax avoidance runs rampant, and the two proposals attempt to outduel digital corporations’ approach of poaching taxes.

Presdent Biden’s leadership on pushing the two pillars through Congress and the G20 demonstrates a recycling of traditional taxation in dealing with Big Tech MNEs. Google, Amazon, Facebook, and Apple (“GAFA”) awaits trial as Washington envisions .

The lore of the minimum tax plan is “.” The global taxation reset presses for a pro rata basis of digital taxation to avoid base erosion. If Congress favors this plan, digital MNEs may fall prey to a .

Ambitious and focused, the OECD will ensure that all major players have some skin in the game of international taxation and digitalisation.

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Photo by Olga DeLawrence ()

Tiffany Wang is an��IPilogue��Writer,��Intellectual Property Journal Editor, and a 2L JD Candidate at Osgoode Hall Law School.��

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Intellectual property and taxes—an unlikely convergence.����

Since the����has accelerated on a global scale. As����(marking��a 74% increase in 44 years).��.����

Intellectual property is a key category of intangible assets. Intellectual property falls into the category of����among others. Often, trademark and patent are protection tools to prevent competitors from exploiting value-driving assets.��

Intangible assets inevitably lead to a quagmire: how do governments tax intangibles?��. How does one impose taxes on something invisible (e.g.��data or goodwill)?��Or something��with a��value��more difficult to��decipher?����

Under paragraph 3(a) of the��Income Tax Act��(“ITA”),��. Property is defined in section 248 of the ITA as����whether real or personal or corporeal or incorporeal. Logically, intellectual property may be subject to taxation under paragraph 3(a). However,��. Not only does the difficulty of determining the fair market value of intangible assets render taxation different from the traditional economy, but the lack of concrete legislative guidance undermines��the predictability and efficiency of taxation.����

Another issue is the difficulty in treating intellectual property as either capital or income. Intangible assets can simultaneously fall into both categories. For instance,��. However, if a taxpayer sells a copyright-protected work and transfers copyright, then the revenue generated would be income.����

As other jurisdictions have reformed the taxation of intangible assets, Canada has remained largely stagnant on the matter. .��Additionally, the Organisation for Economic Co-operation and Development has turned to base erosion and profit shifting tools to strategize how to close the taxation loopholes triggered by intangible assets and payments (e.g.��royalties).����

The rapid replacement of brick-and-mortar industries by digitalization creates opportunities to reform taxation. To parallel business development, perhaps novel legislative reforms are required to ensure that Canada does not fall behind in the global restructuring of taxation.����

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Background: “Google France checked in at Bermuda”

The ��is the latest volley in an between France and internet behemoths such as and . Essentially, it has become common practice for these companies to operate with expenses (such as labour) concentrated in high-tax countries in the European Union, such as France and the UK, while routing most of their revenues through “tax havens” such as , the , and Bermuda, thereby avoiding an estimated average of 500 million euros per year in corporate tax, in France alone. The data-mining tax is one of several proposed solutions, following an attempted and controversial .

The Rationale: “User added a new job at Facebook, Google, Amazon, and Apple”

The rationale behind the tax recommendation, elaborated upon in Forbes by one of the , is as follows: Data plays such an that it may now be considered the “raw material” of the digital economy. Users provide what may soon be literally lifetimes of data in various forms online, whether collected through behaviour-tracking cookies, submitted through tweets and searches, or inferred through analytics. This allows online companies and applications to laser-target users through features and ads, monetizing the collated data. Thus, users themselves provide data that feeds back into the supply-production-distribution-consumption chain, and according to the report's authors, this turns users into employees whose unpaid labour of providing data produces value for these companies. This user-created value is unaccounted for, and should be taxed.

Implementation: “Facebook added 1 billion friends. Auditor poked Facebook.”

Since international tax law currently fails to account for the geography-heedless nature of user data-based business models, the data-mining tax (which the French government has yet to endorse), is meant as a step towards the report's proposed . The tax would apply to both international and domestic businesses that regularly and systematically monitor online user behaviours of those in France. Tax rates would depend on various factors: how many users are tracked, the type of data collected, ethical issues, and level of respect for user privacy and control, among others.

Analysis: “@User tweets about #Privacy #ConflictofInterest #Competition and #PublicUtilities”

The idea of taxing data-mining immediately brings a number of issues to mind, the first of which is suggestively indicated by other names for the proposal: some call it a or a “” policy. It may be problematic to create monetary incentives for corporations to respect user privacy, as it essentially commoditizes privacy (or the lack thereof) and may erode higher ideals of respecting privacy for its own sake; perhaps those who warrant the term “predator” should not be made to pay, but should restrain from undue preying altogether. From a practical perspective, the act itself of auditing companies' practices may involve questionably invasive technological practices, such as .

Second, tying government revenue to companies' privacy practices the way this tax would (where less user control means the government levies higher taxes) creates a potential conflict of interest, if the government is supposed to have citizens' best privacy interests at heart. Moreover, since the data belongs to the user, the labour model underlying the report's recommendation raises the thought that perhaps users themselves should be paid for it.

Third, the data-mining proposal prompts interesting connections between . As demonstrated by cases against , (), and , such companies walk a fine line between maintaining a healthy monopoly and engaging in anti-competitive practices. Incentivizing better privacy policies through taxes may put a damper on the endless reach for data to sell to advertisers, while creating room for smaller competitors who more effectively prioritize user privacy and control.

Fourth, turning data-mining into a source of taxation evokes questions about the role of privately owned technological platforms in the public sphere. Whether with or , such websites at times seem to approach the of . The problem is that regardless of sociological status, economically and structurally these companies are wholly private. This unique yet rising combination means that attempts to regulate the driving business model warrant particularly careful scrutiny, and perhaps a conversation about what such sites' status ought to be.

Finally, it bears remembering, first, that the companies in question are offering free services whose on a voluntary basis (though see the public utility debate linked above). Second, whether or not data-mining becomes taxable, Google, Facebook, et al. already and will continue to monitor and benefit from users' data regardless. One could then argue that the public may as well take advantage of that fact, in this case via taxation. As the old adage goes, after all, you are what you tweet.

Cynthia Khoo is a JD Candidate at the University of Victoria.

*Term coined for this post, based on the notion that the collected “property” is intangible (unlike real or personal property), yet not necessarily created or thought up (unlike intellectual property), but simply gleaned from users' data trails as they go about their daily lives on the internet.

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