There is a piece in the AFR with the headline:
Why is the technology industry so afraid of tax?
My RMIT colleague Jason Potts and I think we have an answer.
It revolves around differentiating between intellectual property and intellectual property rights. Government thinks that without intellectual property rights that intellectual property doesn’t exist. As such governments think that they can unilaterally expropriate intellectual property by simply varying the rights to that property. Now there are two ways to expropriate intellectual property: outright theft and excess taxation.
This is why, we think, technology companies locate their IP in so-called “tax havens”. To prevent their property from being over-taxed. When Joe Hockey used to claim that we had an out-of-date tax system he wasn’t far wrong – just that he drew the wrong conclusions. Here is Michael Bloomberg explaining the difference between the old economy and the new economy:
For the first time in human history, the majority of people in the developed world are being asked to make a living with their minds, rather than their muscles. For 3,000 years, humankind had an economy based on farming: Till the soil, plant the seed, harvest the crop. It was hard to do, but fairly easy to learn. Then, for 300 years, we had an economy based on industry: Mold the parts, turn the crank, assemble the product. This was hard to do, but also fairly easy to learn.
Now, we have an economy based on information: Acquire the knowledge, apply the analytics and use your creativity. This is hard to do and hard to learn, and even once you’ve mastered it, you have to start learning all over again, pretty much every day.
Anyway – hopefully Jason and I will have a paper setting out the full argument soon.