The Emergence of Data Corporations as Supra States

Here is the prophecy- Data corporations are emerging as a form of political entities capable of taxing people; dispensing justice and deciding who should do business!

This is about the mega data corporations- The Googles and Facebooks of the world- and how they are shaping our world. We will first focus on the disparate elements.

 

Taxation

The most obvious relationship between a company and a government (any government) is the ability of the company to pay taxes to the government. In return, the government assures the company, a stable region to do its business. And any company that didn’t pay taxes to the government would be punished proportionately, by the government. There are many ways in which a government can punish a company for not paying taxes. It may give the company a notice to pay taxes. It may put the company under bankruptcy if a failing business is the reason for the inability to pay taxes; or, worse, nationalize the company.

Now, see what is happening.

Google and Facebook together created close to Rs. 10,000 crores worth of revenue in India in 2017-18. But how much taxes did they pay to the Indian government? Only Rs. 240 crores, primarily on income.

So, how are they doing this? Take the case of Google.

Google India reported revenues in 2017-18 as Rs 9,231 crore of which Rs 6,390 crore was from users within India. There is another curious part. Google India is owned by Google International LLC, a company registered in the US. This is just a legal entity to hold such companies as Google India and others. But Google India’s parent company is Alphabet Inc.! You may wonder WTH?!

See, a holding company is generally a legal entity to keep different subsidiaries together. But parent company Alphabet Inc. is something that runs its own businesses apart from what Google India does.

Anyway, Google India paid Rs 8,711 crore to Google International LLC and classified it as expenses. So, what this does is, on paper Google India incurred Rs. 8,711 crores of expenses to another entity and so the government cannot tax it.

But the fact is more than 90 percent of Google India’s payments were in effect revenues for its own companies in other jurisdictions. Of these payments, Google India paid its Singapore-based subsidiary, Google Asia Pacific PTE, Rs 6,334 crore primarily for “purchase of services related to advertisement space.”

Even earlier, Google India used to pay similar ‘expense charges’ to its Irish sister subsidiary. And the Indian government challenged Google and said that such expenses were actually royalty being paid by Google India and hence should be taxed. Google, however, stated that it had already paid taxes to the Irish government on the money Google India had paid it and it wasn’t liable to pay another tax in India due to the double taxation avoidance treaty between India and Ireland. Google also stated that Google Ireland was the owner of Google Adwords and Google India was just selling the service in India and paying its Irish subsidiary (the original owner) for using its services.  

But the fact remains, these major data corporations are paying lesser and lesser taxes, not just to India, but also to its home country US. In 2017, Google moved $22.7 billion of its revenue through a Dutch shell company to Bermuda, where companies pay no income tax, as part of an arrangement that allows it to reduce taxes. The subsidiary in the Netherlands is used to shift revenue earned outside the United States to Google Ireland Holdings, an affiliate based in Bermuda. The tax strategy is known as the “Double Irish, Dutch Sandwich.”

This is not just, Google, but many of these data corporations, which can set up businesses virtually anywhere without physical infrastructure, are resorting to such loopholes in global taxation systems to pay lesser and lesser taxes to governments.

Here’s a curious fact- even the most malicious corporation in history, the East India Company contributed so much in revenue to the British empire that its survival had become paramount to the British parliament.

 

Dispensers of justice

On the 26th of May, Twitter flagged two posts of US President Donald Trump as containing misleading statements related to the upcoming elections. While it may look normal for us as users, but by flagging the posts and giving its ‘judgments’ on the US president’s post, Twitter did something that was until recently only reserved to the courts and parliaments- Dispensation of justice.

This is not a one-off event. Twitter had been in a similar tussle with different political parties in India during the 2019 elections as Twitter went on a drive to ensure only those posts, which the Twitter considered right, were visible for users.

Just last week, something even more peculiar happened- Google removed the PayTM app from the Play store for a few hours. And just by the virtue of being off the Play store, Paytm lost many users and they withdrew their money from the platform out of natural panic among the users. And one likely beneficiary of this panic in PayTM users would have been PayTM’s rival, Google’s own Google Pay!

While Google said that PayTM was promoting gambling in its platform, PayTM boss Vijay Shekhar Sharma said that all that Paytm was promoting was cashback to the PayTM customers, something that all platforms do. And this raises suspicion. More so because Google had a PayTM’s rival as one of its major Indian business.

And here again, Google did something that until recently could only be done by governments or courts- shut businesses down-by acting as some kind of a tribunal.

As we see, these multinational data corporations with millions of users are less and less accountable to governments; these corporations can decide which posts are ‘right’ and which are ‘wrong’, and these corporations can promote and shut businesses at will without governments able to do much to support the smaller businesses dependent on these larger corporations’ ecosystems.

This smacks us to ask the question- Are we seeing the emergence of a new kind of political authority? 

You see there are democracies; and there are monarchies, run by kings and queens; and then there are aristocratic systems, where an elite clique that controls the political power- and this elite could be communists, or the rich or, even members of a family.

But here in the 21st century, we are seeing a whole new kind of sociopolitical governance system as more and more of the physical world integrates with the digital world- The Data Corporations.