When the levy breaks
In December the Australian government announced a new strategy to push digital platforms into deals with news businesses. Just two months later, the strategy has faltered in the face of threats from US president Donald Trump against countries targeting US tech companies.
The proposed News Bargaining Incentive would shore up a critical weakness in the existing News Media Bargaining Code by imposing a levy on designated platforms irrespective of whether they carry news. The levy can be offset by deals platforms make with news companies. But last week the government announced it would pause development after President Trump said the US would impose tariffs or take other steps ‘to repair any resulting imbalance’ resulting from taxes, fines, penalties or other burdens imposed on US tech companies, claiming that these are ‘discriminatory, disproportionate or designed to transfer significant funds ... to the foreign government’ or their ‘favoured domestic entities’.
Although the levy will not raise tax revenue, it will result in the transfer of funds to particular domestic entities, namely news businesses. Of course, the rationale for the proposed incentive, as with the bargaining code, is to counter the imbalance in the Australian media market that favours the tech giants. And although the Australian scheme will likely include China-based TikTok, the fact that most large digital platforms are run by US companies gives grist to Trump’s mill. Looming in the background is the now-uncertain future of Labor’s significant tech-regulation agenda, including proposals for a new digital competition regime and online safety reforms.
Treasurer Jim Chalmers is in Washington this week for discussions over potential tariffs on Australian steel and aluminium. But there is a broader context to the conflict. OECD members have been negotiating the terms of a multilateral convention to allocate taxing rights to countries where multinational companies operate, part of an ‘Inclusive Framework’ to address base erosion and profit-shifting. The Biden administration was eager to make the deal to stem the trend towards the imposition of unilateral digital services taxes on US tech companies. It also saw the framework as a means to stave off an international tax convention proposed at the United Nations. But in a seemingly self-pincering move, Trump has rejected both forums. On his first day of office, he withdrew from an agreement to impose a minimum 15% tax on corporations, also part of the Inclusive Framework. And when negotiations over the UN convention commenced in New York earlier this month, the US walked out, having failed to convince other countries to do the same. Both the OECD and the UN are forging ahead – but without the US on board, unilateral action may be the only way forward.
In estimates this week, Treasury said they expect the impact of steel and aluminium tariffs ‘on the Australian economy as a whole to be modest’. This of course won’t placate the mining industry. The impact of the bargaining incentive on US tech companies is also likely to be modest. But that may not placate the US, and certainly not the tech companies, who are eager to nip in the bud any scheme that successfully channels revenue to the media for fear of an international domino effect.
Michael Davis, CMT Research Fellow
