Nicolas Colin. 37-year-old. Co-founder & Partner, TheFamily, with Alice Zagury and Oussama Ammar. Member of the Board, Commission nationale de l’informatique et des libertés. Formerly in charge, with Pierre Collin (conseiller d’Etat), of a report commissionned by the French Government about the tax system and the digital economy. As such, ranked in the top ten of the #GlobalTax50 in 2013. Co-author, with Henri Verdier, of L’Âge de la multitude. Graduated from Telecom Bretagne with a major in computer science. Graduated from the Institut d’études politiques (Sciences Po) with a major in public administration and a minor in American studies. Graduated from the École nationale d’administration (ENA) before becoming an inspecteur des finances at the Inspection générale des finances. Former co-chief of staff for the “Zelnik Task Force”. Founder and former CEO of 1x1connect, co-founder of Stand Alone Media. Teaches at Telecom Bretagne and at Sciences Po. Member of the board of the Rules for Growth Institute.
Corporate Tax 2.0
In 2012, the French Government asked Pierre Collin, a member of the French Conseil d’Etat, and myself to draft a report on the taxation of the digital economy. As an independent task force, our role was to recommend changes to national and international tax rules to take better account of value creation by digital firms. The report was published in January 2013. At its core lies an analysis of how the digital economy creates and which role the multitude of application users plays in this value creation. User activity generates data, which can be stored, aggregated and reused in many ways. Therefore user data is in effect put back into the supply chain where it creates value on the long term. As the value flowing from user data has a ripple effect on all the sides of business models, users become part of business operations, thereby blurring the line that used to separate consumption from production. As with content creation or customer support, users tend to replace employees and contractors in the supply chain. And because users are not paid like employees (and they do not want to be for fear of corrupting the product), their “free work” allows tech companies to reach the highest economies of scale and massive profitability.
The report I wrote with Pierre Collin mainly recommends that developed countries recover the power to tax profits made by giant tech companies. Corporate tax is the best way to tax corporations. It’s neutral and gets revenue only from profitable companies. Yet tax laws ignore the very fact that each time data is involved, users become part of the operations. Therefore, corporate tax must be reformed to adapt to the digital economy. A new definition of a permanent establishment must be introduced, grounded in the fact that users play a key role in digital value creation. Through user data, value is created where applications are used by people, not only in Bermuda or in the Cayman Islands. Accordingly, the goal should be to have a permanent establishment each time data is collected on a domestic market to fuel a business targeted on that same market. The amount of profits that should be declared to the local tax authority would diminish profits transferred to pay for intangible assets located abroad, depending on the number of users and the intensity of data collection.
As a secondary proposal, Pierre and I also propose that, while we negotiate in the OECD, France gain leverage by taxing certain data collection practices. Data is in effect the only tax base that ensures neutrality across the whole digital economy. But as the value of data is not yet mastered, the goal should not be to tax data collection per se. Instead it should be to create an incentive for businesses that rely on regular and systematic monitoring to adopt compliant practices in favor of user empowerment and innovation. This tax can be compared to the concept of a carbon tax, which grew out of the 1997 Kyoto Protocol on climate change. It would tax 1) any company 2) that collects data through regular and systematic monitoring 3) from lots of users based in France and 4) that refuse to comply with stronger privacy and user empowerment requirements. In the end, it provides incentives to firms that better inform their users and open up APIs to enable smart disclosure, as defined by Cass Sunstein (the “timely release of complex information and data in standardized, machine-readable format in ways that enable consumers to make informed decisions”).