Australia threatens tech companies with 2.25 percent tax if they don’t pay publishers

Last time an idea like this came up, Meta packed up its toys and went home

Australia has come up with a new way to ensure social media and search companies pay to support journalism: a 2.25 percent tax on revenue that’s avoidable if companies instead do deals with local media.

The Land Down Under floated the scheme as a replacement for the 2021 News Media Bargaining Code that put a nominal value on links to news content shared on social media, and strongly suggested the likes of Google and Meta to negotiate with local publishers to agree on fee to secure permission to share links. If tech companies didn’t come to the table, they faced forced arbitration.

During negotiations, Meta decided it would not allow its users to share links to news stories in Australia. The social media giant later relented in Australia and struck deals with some local publishers.

But when Canada introduced a similar law, Meta stopped allowing its local users to share news links to make itself ineligible for payments – and maintains that position to this day.

As deals struck under the News Media Bargaining Code came up for renewal, Meta said it wouldn’t play ball.

So Australia’s government changed the rules.

The new game is called the News Bargaining Incentive and, per draft legislation that dropped on Tuesday, requires any social media outfit that allows access to news content and makes AU$250 million a year in Australia ($180 million) to cough up 2.25 percent of local revenue.

Eligible entities can offset that tax by doing a deal to pay Australian media companies to fund content creation, or for the right to use their content.

The proposed scheme applies to any media organization with revenue of AU$150,000 ($106,000) or more, a dominant purpose of serving Australian audiences, and meets professional standards tests including offering a mechanism for complaints. The Register is not eligible to participate.

Australian media companies, like many elsewhere around the world, were slow to erect paywalls or innovate to protect their classified advertising businesses. The likes of Google and Meta quickly ate their lunches in most categories of advertising because they understood the internet, and regulators mostly missed the shift from one concentrated pool of providers to the new online order.

At the time of the transition, Australia’s major media companies were mostly locally-owned. Tech companies, by contrast, shipped profits offshore while paying little tax.

As headcounts at Australian media organizations fell sharply, politicians noticed the money flow and also started to worry that the fourth estate had become so threadbare it could not fill its roles as a public interest watchdog and disseminator of professionally produced and curated information.

The News Media Bargaining Code was Australia’s first attempt at finding new ways to fund journalism, and informed other nations as they implemented similar measures.

Now Australia has produced the new idea of the News Bargaining Incentive, and a plan to introduce it for the financial year ending June 30th – just two months from now if the bill passes with unusual speed.

Big Tech campaigned hard against Australia’s effort in this field, but has kept its powder dry as the new deadline approaches.

Australia has been a thorn in Big Tech’s side of late, with its ban on allowing children under 16 to access social media attracting attention – and imitators – around the world.

Despite its flaws – most teens say they can still access social media – the ban is popular Down Under because many people believe social media companies behave irresponsibly and have therefore lost their social licenses.

Australia is therefore offering Big Tech the chance to make a government-approved contribution to the nation’s health and perhaps emerge looking less like villains.

Let’s see if they rise to the challenge. ®