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DST Act 3 – The Return of Trump and Threats of Tariff and Tax Retaliation
Report from the Financial Times
In Brief – President Donald Trump has effectively pulled the United States out of the global corporate tax reform agreement at the OECD negotiated by the Biden Administration in 2021 and backed by 140 countries. That deal tried to address two long-running progressive tax policy concerns – a way to increase taxes paid by digital giants who often operate across national borders, and frustration with low-tax “havens”. During the first Trump Administration, France led the way to increase taxes on digital giants, enacting a “Digital Services Tax” (DST) on the biggest internet companies, which were nearly all US-based. Other countries followed suit. President Trump responded with tariff threats, the DSTs were delayed, and talks moved to the OECD. The Biden Administration changed tack, adding the tax haven issue to the mix as their top priority. This led to a two-part deal. To eliminate tax havens, countries agreed to set a minimum corporate tax of 15 percent. The DST section was expanded to cover other highly profitable consumer-facing companies like pharmaceuticals. The new Memorandum on the OECD Global Tax Deal calls on the Treasury Secretary and USTR to propose ways to retaliate against governments that impose taxes that violate existing tax treaties, which likely includes DST regimes. A separate Memorandum on Trade Policy instructs officials to look for “discriminatory or extraterritorial” taxes on US citizens or companies in the context of US Section 891 that allows the US to double the tax bills of foreign companies or individuals whose governments impose higher taxes on Americans.
Context – The US Congress never made changes to conform to either part of the OECD deal due to opposition from Republicans and many parts of the US business community, who expect higher taxes on overseas earnings. Also, with the US not joining on, more than a dozen countries have started collecting their national DST taxes from large, mostly American, digital companies. President Trump took a very aggressive stance with the Europeans on DST taxes in 2020 at a time when his relationships with the tech giants seemed very strained. Those relationships appear much stronger now.
Meta Wins Temporary Relief in India from WhatsApp Data Sharing Ban
Report from Reuters
In Brief – A two-judge panel of the Indian National Company Law Appellate Tribunal (NCLAT) has temporarily halted the Competition Commission of India (CCI) order prohibiting WhatsApp from sharing user data with other services of its parent company, Meta. The judges ruled that the ban could cripple the WhatsApp business and that the CCI order should be stayed while it was appealed. The NCLAT also stayed the CCI's penalty of 2.13 billion rupees (around $25.25 million), although WhatsApp was required to deposit 50 percent of the amount. The CCI ruled in November that WhatsApp and Meta violated the 2002 Competition Act by “abusing its dominant position” when the messaging app’s privacy policy was changed in 2021 to require users to accept that their data could be shared with other companies and services within Meta and imposed a five-year prohibition on WhatsApp sharing its user data with other Meta companies for advertising purposes. Data sharing for purposes other than advertising requires a detailed explanation in the user agreement and must be needed to provide the WhatsApp service itself. As part of their appeal of the order, Meta claimed that prohibiting data sharing between WhatsApp and other platforms such as Facebook and Instagram in India would reduce business opportunities for Indian small businesses using those platforms to connect with customers.
Context – India is Meta’s biggest market when measured by users, with 500 million people using WhatsApp and more than 350 million Facebook users. The CCI’s effort to use antitrust law to block data sharing between WhatsApp and other Meta services is similar to the successful effort of the German Federal Cartel Office (FCO) to police Meta data policies and prohibit combining the data of individual users across its different services without their freely given consent. The German antitrust agency announced new Meta data protocols last October that give German users “much greater control over how their data are combined.” Meta did not say if the new policies would be expanded to other markets.
EU and German Regulators Testing How Platforms Will Handle Elections
Report from Bloomberg
In Brief – The European Commission and German Government are planning to perform a “stress test” on the major digital platforms on January 31 to determine their processes regarding the upcoming German elections. Meta, Microsoft, Google, Snap, TikTok, and X have been invited to a meeting hosted by the German Digital Services Coordinator where Commission officials will quiz them on how they will deal with conduct involving the February 23rd election, including AI fakes, cyber-attacks or disinformation campaigns. The stress test is being performed as part of the platforms’ compliance with the EU’s Digital Services Act (DSA), which requires large platforms to combat harmful and illegal content. The Commission hosted a roundtable last June in the run-up to the EU parliamentary elections, as well as last November after the first round of the Romanian Presidential elections.
Context – Regardless of the official communiques, the increasingly massive public profile of Elon Musk on political matters, and the alleged role of social media, especially TikTok, on the now paused Romanian presidential election, are hanging over this regulatory intervention. And Musk comes hand-in-hand with the perspective of President Trump who seems to hold government-directed online “censorship” of conservative viewpoints as first among his digital policy concerns. It’s not possible to overlook that Musk’s high-profile intervention in the German elections, including praising the AfD and hosting a one-on-one interview with its leader, his criticism of leaders like UK PM Keir Starmer, his huge backing of candidate Donald Trump, or the shock win in the first Romanian election round by insurgent ultranationalist candidate Călin Georgescu quickly attributed by the Romanian Government to Russia-sponsored interference on TikTok, are all populist challenges to the traditional order. Both X and TikTok are already being investigated under the DSA by the Commission challenging whether their recommendation algorithms are properly balanced and protected from alleged disinformation or partisan interference.
Singapore Imposes App User Age Verification Duties on Large App Stores
Report from Channel News Asia
In Brief – Singapore’s Infocomm Media Development Authority (IMDA), the country’s digital and media regulator, has announced that app stores will soon be required to protect children from inappropriate apps through age verification measures. The new rules under the Code of Practice for Online Safety for App Distribution Services will take effect on March 31. Designated app stores, those with significant reach or impact, including the Apple App Store, Google Play Store, Huawei App Gallery, Microsoft Store, and Samsung Galaxy Store, will have to implement "system-level measures" to curtail the risk of exposure to harmful content for users, especially children. Under the code, categories of harmful conduct include sexual content, violent content, cyberbullying, promoting suicide and self-harm, and endangering public health. The IMDA’s fact sheet notes that governments worldwide, including Australia, the European Union, the UK, and the US, are introducing measures to ensure online services are age-appropriate for children and teens. The new Singaporean regime allows the app store providers to use systems for “age estimation” to determine the likely age of a user, such as through machine learning or facial age analysis, “age verification” that uses sources of identification such as a digital ID or credit card, or a combination of techniques. If a covered app store platform claims that it is unable to meet the March 31 deadline, they must reach agreement with the IMDA on an acceptable compliance plan and timeline, starting with blocking young people from apps for users 18 and above.
Context – As the IMDA noted, online age verification mandates look primed to spread. Australia’s legislation requiring social media platforms to set and enforce a minimum age of 16 made global news and many countries, including in Asia, are looking at versions of age floors, especially for online pornography and social media. Meta has been especially vocal arguing that the app stores, especially those linked to top device manufacturers, are best situated to enforce age verification.
About PEI
Platform Economy Insights aims to provide small-to-mid-sized digital platform business leaders, investors and firms that support industry growth, and public officials, staff and media who track the platform economy, with expert analysis of public policy trends impacting the digital platform industry globally.
Executive Editor Brian Bieron and Senior Advisor Tod Cohen are recognized Internet, trade and platform policy leaders who have served as top global public policy experts to some of the Internet industry's leading platform businesses. They are now providing insights, analysis and reporting to wider audiences through a public policy platform that challenges the reach of all but the largest Internet industry public affairs teams.