[Chapter-delegates] The surprisingly plausible argument for a (modest) bit tax in Africa.

[Dave Burstein]

Winthrop Yu asked a fair question about my comment in a previous thread

> ... "Sender pays" is anti-consumer in developed countries but _possibly_
>  appropriate in poor ones.  ...
>

  How _possibly_ so?

    Forgive the length of my response, but these are important issues for
some of the poorest countries in the world. A brilliant and well-financed
persuader, U.S. lawyer-lobbyist David Gross, created a straw man for the
debate on this at WCIT and obscured important issues.

    *I'm still inclined against it*, which is why I said "possibly."
However, a reasonable case can be made that many poorer countries would be
well served by a border tax on bits.

    I've been fighting Verizon, Deutsche Telekom and the likely with
passion on this since before Tim Wu coined the term Net Neutrality. It's
just a rakeoff by powerful carriers to the detriment of consumers. But
nearly every nation in Africa took the attitude they should be able to
collect on incoming traffic, so I looked more deeply at the issues there.

    It's enormously disrespectful for Western experts, typically financed
by a handful of giant companies who want a free hand, to presume we know
what's best for Africa. That's "White Man's Burden" thinking and diminishes
those who take that attitude. In most cases, the Africans - many of them
truly expert, several holding U.S. PhD's - understand their needs better.
The Africans I met at WCIT were delighted to discuss the issues and learn
and I learned from them in turn. The Americans lobbying on this came across
of uninformed.

    Turns out it's tricky when you get into the details of where the money
goes. In a developed country, the amounts involved are small and there are
plenty of other ways to serve social purposes. I've long been a strong
supporter of net neutrality and opposed carriers imposing a charge on
incoming traffic. People on this list know why that's likely to be a
negative thing.

     When we're dealing with poor countries however, several factors come
in that are very minor in the U.S. or Germany. They may be important enough
that a (moderate) tax on incoming Internet traffic is the right national
policy. Raising revenue in Africa through a (moderate) tax on traffic may
be the only way to prevent the massive tax evasion of the giant Internet
companies, of strengthening the negotiating position with the undersea
cable cartels, and of replacing the loss of foreign exchange from carrier
VOIP replacing PSTN calls. If you follow the money on that, you see a
windfall gain for the likes of AT&T and a loss of revenue for say Cameroon.
(And also consumer benefits, of course)

     The million dollar silver tongue promoted the idea that if Africa
imposed any charge, universities and Google would cut them off from
education and other benefits of the net. That's certainly possible, but
wildly implausible at the levels people are discussing. It only makes sense
if the charge were far higher than anyone I knew was proposing. But that
was so obscured many well-meaning people believed the spin. Brilliant work
on David's part.

  *Despite the high cost of transit to Africa, no one is cutting them off.
So if the tax is established at fraction of the transit costs, the feared
consequences are highly unlikely at best - no matter how many folks Google
inspires to say otherwise.*
---------------

Some of the problems the Africans and Arabs wanted to address are possibly
ill-served by this method, but they don't see better choices.

     One problem is the practical ability of the Internet giants to avoid
paying taxes. Google and Apple are under attack in England and much of
Europe of using tax havens and loopholes to pay little or no tax. (See the
British newspapers.) ISOC is certainly not in favor of tax-dodging. My
belief is that the United Kingdom and the EU have plenty of other levers to
collect a fair share of taxes from Google. But Ghana probably doesn't; the
only way for Ghana to collect the amount of a fair tax on ad sales in Ghana
is to impose it domestically. Otherwise, in practice, the an ad for Proctor
and Gamble shampoo to sell in Ghana will be handled by a Belgian ad agency
paying an Irish subsidiary of Google.

    A second problem, probably involving more dollars, is the net effect of
bypassing the PSTN is a transfer of income from the poorer countries to
companies and individuals in the richer ones.  Most Africans believe
strongly that the loss of foreign exchange from VOIP replacing voice calls,
etc. is too much of a blow to their economy to be acceptable. In many poor
African countries, that 20 cents a minute adds up to an appreciable part of
their annual hard currency earnings. Especially because in many cases, and
certainly in the short term, most of the reduction from bypassing the PSTN
with VOIP by telcos in the developed world sending traffic accrues to the
company, not the consumer.

    A third issue is the very high cost of transit because in many places
the 1-3 fiber networks have enough power to demand cartel-like prices.
That's not true everywhere but is very common. Since the transit cartel
would also be hurt if traffic diminishes, they have incentive to lower
their rates to prevent it. So some of the net cost of the "border tax"
would be borne by folks like France Telecom and other cable owners, usually
quite profitable.

------------

    In much of Africa, it's very difficult to collect taxes. There's
certainly no way to raise locally foreign exchange, desperately needed for
oil, technology, and medicine. (And yes, I know some goes to bank accounts
in Switzerland.) So the very few hard currency source of dollars become
crucial. The loss of the phone charges is very harmful to some of these
economies. It's a substantial fraction of the annual foreign exchange
earnings.

   As I said, to my best understanding this tax on the Internet isn't
worth it. But the arguents the Africans make deserve respect.

Dave Burstein




> On 11/18/2013 2:01 AM, Dave Burstein wrote:
>
>> ...
>> 
>>
>
> WYn
> PH
>
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