The U.S. Patent Office recognizes December 1, 1885, as the first time Dr Pepper was served. Coca-Cola was introduced a year later. Dr. Pepper was originally created by Charles Alderton, a pharmacist in Morrison’s Old Corner Drug Store in Waco, Texas, who gave the formula to Morrison, who named it Dr. Pepper. The formula for Dr Pepper is a trade secret, and supposedly the recipe is kept as two separate halves in safety deposit boxes in separate banks in Dallas, Texas.
On Friday, December 8, 2017, I had the privilege of presenting a seminar, hosted by Lawline, entitled “Augmented, Native and Interactive: The New World of Digital & Mobil Advertising.” This was broadcast live on the Web and recorded for subsequent on demand viewing and was my second presentation at Lawline. The first “Online & Mobile Digital Interactive Advertising: Video Games, Branded Entertainment, Native Advertising and Beyond” remains available as a web-based, on demand offering at Lawline.
This seminar provided an update on many of the concepts and principles discussed in the first program, including some basic principles of advertising law that applies in both the traditional and digital/mobile environment and provided updated information on game advertising – both advertising the game and in-game advertising – as well native advertising and guidance from the Federal Trade Commission. This recent session also delved into a number of digital and mobile advertising issues that were not part of the first presentation, such as celebrity endorsements, bloggers, experts & consumer testimonials in social media, augmented reality and advertising in virtual worlds, programmatic buying and the current tensions in the industry concerning transparency and relationships between advertisers and integrated agencies. You can view the slide images of my presentation “The New World of Digital & Mobil Advertising” and, of course, you can view the recorded session which is available exclusively through Lawline.
“Each generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it.”
Economic activity is not only transnational, but increasingly digital. A business is physically located in one country, sells goods or services in another country and then declares its profits in yet a third country? Who is the taxing authority? Where is the transaction taxed and to which government do taxes get paid? This has never been a simple question internationally, but in today’s digital world, where borderless transactions are more frequent and more common, the leaders of the G-20 countries, in the Summit declaration of 18-19 June 2012 in Mexico, decried the consequences of these developments — tax base erosion and profit shifting to lower-tax jurisdictions. Even the proposed U.S. tax reform currently before the U.S. Congress addresses concerns about tax base erosion.
In 2013 the Organization of Economic Cooperation and Development (“OECD”) began a project to combat tax base erosion and profit shifting and the first action item of their Final Report of 2015 concludes the digital economy cannot be considered separate from the rest of the economy for tax purposes – it is increasingly becoming the economy itself. Significantly, the OECD believes solutions lie not so much in creating new rules, but adapting existing regulations to address the new, digital environment. Meanwhile, the European Union and some countries in Europe are making their own provisions for dealing with changes caused by the digital economy. With its Communication of September 2017, A Fair and Efficient Tax System in the European Union for the Digital Single Market, the European Commission (“EC”) announced a legislative proposal for the Digital Single Market in Europe, that is intended to be available for implementation if an adequate, ready and preferably international solution inside the G-20/OECD project framework is not implemented. The two main policy challenges addressed by the EC are: (1) where to tax digital services provided by companies with little or no physical presence and (2) what is taxable (e.g., the value created by intangible assets, data and knowledge). While a long term approach is favored, the EC is focused on short term measures to address some of these problems quickly such as a tax on untaxed or insufficiently taxed income generated from internet-based business activities (whether creditable against the corporate income tax or as a separate tax); a standalone gross-basis withholding tax on certain payments made to non-resident providers of goods and services ordered online; a levy on revenues generated from the provision of digital services or advertising activity.
In addition to European-wide solutions, some individual countries are also attempting to address the taxation of the digital economy. For example, in September 2016, a bill was introduced before the Italian Parliament regarding tax measures applicable to competition in digital commercial activities (DDL S.2526 “Misure in materia fiscale per la concorrenza nell’economia digitale” del 10 novembre 2016). The bill would not only reinforce the powers of Agenzia delle Entrate, the Italian governmental agency which collects taxes and revenue, but would introduce a “hidden permanent establishment” (“stabile organizzazione occulta”) concept which would consider revenues generated from certain types of international transactions, as income generated in Italy. For example, fees paid to non-Italian companies by Italian consumers for the purchase of software licenses distributed on the Italian market. Thus, if a U.S. company engages in online business regularly, with greater than 500 transactions in any six-month period and collecting more than € 1 Million in that same period, that company would be considered to have a “hidden permanent establishment” subject to tax by the Italian authorities. In addition, the proposed Italian 2018 Budget Law (not yet adopted), includes a proposal for a 6% web tax on services provided by nonresident companies and individuals on revenues generated from the sale to Italian residents of fully “dematerialised services” (e.g., intangible services such as video and audio downloads).
The common theme in these new proposals in the European Union and EU member countries suggests that governments will look increasingly to tax where economic value is delivered. If your business is part of the digital economy you clearly need to monitor these developments and pay attention to the legislative and regulatory initiatives being considered at the national, regional and multinational levels, especially in Europe, an important market and one which appears to be moving more quickly than other regions of the world. You can read the full Client Alert on this issue and if you need more information, have questions or would like assistance, the International Practice Group at Rimon, with an office in Rome, is particularly well suited to serve your needs. Feel free to contact Stephen Díaz Gavin, Partner based in Washington, DC and Rome or Claudio Palmieri, Counsel to Rimon and principal of Studio Legale Palmieri – Rimon Italia, based in Rome. Of course, you can always contact me, Joe Rosenbaum, or any of the lawyers at Rimon with whom you regularly work.
What is the oldest soft drink in America?
Because Dr. Westheimer was short (1.40 metres tall), she was trained as a scout and sniper. She was seriously wounded in action by an exploding shell during the Israeli War of Independence in 1948 and was unable to walk for several months as a result of her injuries. Never having lost her sense of humor (or her skills) she once famously remarked: “I could hit the target smack in the center further away than anyone could believe. Not just that, even though I was tiny and not even much of an athlete, I was incredibly accurate throwing hand grenades too. Even today I can load a Sten automatic rifle in a single minute, blindfolded.”
“Change is inevitable, except from vending machines.”
Karola Ruth Siegel was born in Germany in 1928, the only child of an Orthodox Jewish couple. In 1939, after her father had been taken by the Nazis, her mother and grandmother sent her to Switzerland. She never saw her family again, as her mother and grandmother died in the Holocaust. When she was 17 years old, Holocaust survivor and world renowned sex therapist, media personality and author, Dr. Ruth Westheimer emigrated to then British-controlled Mandatory Palestine and joined the Haganah in Jerusalem. What was she trained to do?
The only word in the English language in which only one vowel appears 6 times is “Indivisibility.”
“First they ignore you, then they laugh at you, then they fight you, then you win.”