The Big Story: UK to start charging digital services tax. The United Kingdom is moving forward with a two percent digital services tax on Internet companies that have a global revenue of more than $648 million, at least $32.4 million of which comes from UK users. The new levy—which is set to go into effect in three weeks—comes after other countries proposed similar taxes, but delayed implementation of their measures in order to allow the Organisation for Economic Co-operation and Development (OECD) time to reach an agreement on a global tech tax.
The Trump administration and Internet companies have argued that efforts to impose digital services taxes unfairly target U.S. tech firms. France introduced a digital services tax last year that would have impose a three percent tax on certain tech companies, but France agreed to to a truce with the U.S.—which was threatening retaliatory tariffs of as much as 100 percent—in order to allow the OECD time to reach a deal before the end of the year. While the OECD’s efforts to reach an agreement on a global tech tax have quelled some of the tech industry’s concerns for the time being, the UK’s digital services tax push could encourage other countries to move ahead with their own levies on Internet companies. The inability to negotiate an international agreement—much less one with the UK—could result in the U.S. imposing additional tariffs against other countries that move forward with their own digital services taxes.
A country-by-country implementation of digital services taxes would be disastrous, leading to a patchwork of international laws and the use of retaliatory tariffs that would negatively impact U.S. startups. Although the revenue threshold for digital services taxes appears to be high, the taxes disproportionately affect U.S. companies that provide critical services to startups and entrepreneurs. It is likely that the added administrative burden and tax liability of these digital services taxes will be passed down to startups and other users in the form of higher service costs. Several U.S. states have already proposed their own legally questionable digital tax proposals based on these international efforts. We are concerned that the UK’s digital services tax will incentivize other countries—and even U.S. states—to pursue their own tax measures without waiting for the OECD to reach an international agreement.
Policy Roundup:
Engine applauds new data privacy bill. Sen. Jerry Moran (R-Kan.) introduced new privacy legislation that would provide consumers with greater control over their data by establishing a federal framework for how businesses should collect, store, and utilize users’ personal information. Evan Engstrom, Engine’s executive director, issued a statement in support of the bill, noting how the legislation “carefully balances strong pro-privacy standards with feasible requirements for startups operating on limited budgets, ensuring that new firms are not put at a competitive disadvantage.”
Senate panel discusses bill challenging liability protections. The Senate Judiciary Committee held a hearing on the EARN IT Act, legislation that would require Internet companies to abide by yet-to-be-determined best practices for identifying and removing child sexual abuse content from their websites, or risk losing the intermediary liability protections they receive under Section 230 of the Communications Decency Act. As we noted in a statement, startups that host user-generated content “wouldn’t be able to function, much less compete with larger incumbents” without the current protections under Section 230, and Internet companies are already actively working with law enforcement to report and remove any illicit content on their sites.
DOJ also examining Section 230 changes. Deputy Attorney General Jeffrey Rosen said at a conference that the Justice Department is planning to propose changes to Section 230 over concerns that the provisions are protecting Internet companies that “enabled illegality and harm the children.”
Lawmakers need to be cautious when considering DMCA changes. The Senate Judiciary IP subcommittee held another hearing in the panel's ongoing review of the Digital Millennium Copyright Act, this time examining how other countries are handling digital piracy concerns. In an op-ed for InsideSources following the hearing, Evan cautioned lawmakers to refrain from making any changes to DMCA that “risk irreparably damaging the fledgling startups that continue to drive innovation and job growth.”
Court strikes down administration’s strict H-1B rules. A U.S. District Court judge in Washington struck down the Trump administration’s strict requirements for H-1B visa holders, calling them “irrational” and “invalid.” The rules, implemented by the U.S. Citizenship and Immigration Services in a 2018 policy memo, required applicants to show what projects they’d be working on over a three-year time period.
White House asks tech firms for help combating the coronavirus. U.S. Chief Technology Officer Michael Kratsios convened a conference call with representatives from Amazon, Google, and other companies this week to request the tech industry’s help in combating the coronavirus. According to participants, the White House asked the companies to help track the spread of the virus, combat online misinformation, and disseminate accurate health information to Internet users.
Senate passes broadband mapping bill. The Senate unanimously passed an updated version of the Broadband Deployment Accuracy and Technological Availability (DATA) Act, legislation that would require the Federal Communications Commission to develop new rules for accurately collecting and sharing “granular broadband availability data.” FCC Chairman Ajit Pai said during a House Appropriations Committee hearing this week that he could not offer an estimate for when the agency would be able to release more accurate broadband mapping data, claiming that the Broadband DATA Act “imposes new mandates the FCC does not have the funding to be able to fulfill." The legislation already passed the House and is now headed to the president’s desk for his signature.
Startup Roundup:
#StartupsEverywhere: Westport, Connecticut. AnytownUSA is the country’s first online market devoted exclusively to the sale of American-made goods. We recently spoke with Geralyn Breig, the founder and CEO of AnytownUSA, to learn a little more about the online marketplace, digital tax concerns, and the future of the platform.
Entrepreneurs working to spread tech hubs across the U.S. The Wall Street Journal highlighted how a group of tech entrepreneurs are working to attract startups and venture funding to states and cities outside of the five major metropolitan areas—Boston, San Diego, San Francisco, Seattle and San Jose, Calif.—that accounted for approximately 90 percent of all U.S. high-tech job growth between 2005 and 2017.
