Taxing Facebook: user data and participation as taxable assets
Date
2023-02-12
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Witwatersrand, Johannesburg
Abstract
Facebook is said to have 2.93 billion active users and it is estimated that by 2026 the number of Facebook users in South Africa will reach 35.92 million. Facebook is said to generate 98.5% of its revenue from digital advertising in the form of targeted advertisements on Facebook and Instagram. A plausible case can be made about the contribution of user data to the profitability of a highly digitalised company such as Meta Platforms Incoporated. This research report has identified three fundamental problems. First, Meta Platforms Incoporated extracts data from users and generate profits through targeted advertising at the location of the user without paying sufficient income tax in the user jurisdiction. Secondly, there is a fundamental problem with how South Africa deals with the income taxation of companies such as Meta Platforms Incoporated. Thirdly, the current tax rules do not allow for taxation to take place at the location of the user and therefore need to be revised. This research report therefore provides five potential solutions that South Africa can adopt to impose income tax on Meta Platforms Incoporated. The solutions include first, the use of the South African source rules (source being at the location of the server); secondly the use of the South African source rules (source being atthe location of the Internet Service Provider); thirdly a tax akin to the mineral royalty tax in the form of a data royalty tax; fourthly the OECD’s Two Pillar Proposal; and fifthly unilateral legislative solutions (using Nigeria and India as a case study)
Description
A research report submitted to the Faculty of Commerce, Law and Management, in partial fulfilment of the requirements for the degree of Master
of Law (Specialising in Taxation Law), University of the Witwatersrand, Johannesburg, 2023
Keywords
Facebook users, Income tax, Source rules, Business profits, Multinational enterprises, UCTD
Citation
Novazi, Zinhle. (2023). Taxing Facebook: user data and participation as taxable assets [Master’s dissertation, University of the Witwatersrand, Johannesburg]. WireDSpace. https://hdl.handle.net/10539/38667