Australia must choose the right metric to tax the digital economy
The three theories of value – activity, intellectual property, infrastructure – that the government could use to determine taxation must be closely examined.
The uncertainty surrounding Google’s proposed $20 billion data-centre investment in Australia is not really about tax. It is about a more basic question: Where is value created in the digital economy?
Google is reportedly seeking clarity about how a large data-centre hub would be taxed, including whether it would be treated as a “permanent establishment” and expose more of its profits to the 30 per cent company tax rate. That concern is reasonable, as it exposes a deeper incoherence in how governments are thinking about taxing digital firms.
