The Digital Economy is So Taxing

– By Stephen Díaz Gavin and Claudio Palmieri

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.

 

Taking Wagers on Sports Betting & Online Gambling

– Joe Rosenbaum

The Professional and Amateur Sports Protection Act of 1992 prohibits most states from authorizing sports betting (the law grandfathered a few states, such as Nevada) and New Jersey has been fighting to convince the Federal government to allow the State to legalize and license sports betting.  The latest attempt to circumvent the Act was the repeal of New Jersey’s own sports betting prohibitions at racetracks and casinos.  That effort was derailed by a series of court decisions, culminating in a 9-3 en banc decision of the Third Circuit Court of Appeals, which then led to the State of New Jersey petitioning the Supreme Court of the United States.

Last month, the Supreme Court refused to deny New Jersey’s challenge to the Federal ban (see, Christopher J. Christie, Governor of New Jersey, et al, Petitioners v. National Collegiate Athletic Association, et al; and New Jersey Thoroughbred Horsemen’s Association, Inc., Petitioner v. National Collegiate Athletic Association, et al) and left the door open to grant certiorari in the case if the Office of the Solicitor General (which is part of the U.S. Department of Justice) argues the case raises serious issues and questions of Federal law. They could, if they so choose, seek to revisit the long-standing position of the DOJ holding sports betting illegal.  To some extent, with the new administration of President Trump in place, many see this as an opportunity to do just that, since many of you may remember that as owner of casinos in Atlantic City, New Jersey, then businessman Donald Trump was a proponent of the legalization of sports betting.

Clearly, as States look to generate other sources of tax revenue, many view this as an opportunity to increase revenues and regulate an activity that has long been associated with organized crime. Indeed, the American Gaming Association estimated well over $4 billion in bets were placed on the Super Bowl last Sunday, virtually all of it, illegally. President Trump has consistently said he is in favor of eliminating or reducing legislation and regulation that restricts what States may or may not do and that encumber businesses needlessly beyond necessary Federal oversight. This may well fit right into that category, although there have been no comments as yet from the Administration.

Former Alabama Senator Jeff Sessions, just confirmed last night as Attorney General of the United States, has voiced opposition to any expansion of online gambling in the past, although when questioned during Senate hearings, did indicate he was willing to take another look at how and to what extent online gaming is being enforced by the Federal government.  There is also the possibility that in deciding to allow sports betting and an expansion of online gaming generally, the Federal government may choose to adopt some form of federally regulated or licensed betting and gambling scheme. While the path ahead is far from certain and opposition remains, some things do seem clear: attitudes are changing, the present administration is not averse to controversial new ideas, is favorably disposed to the elimination of any unnecessary Federal regulation that stands in the way of creating jobs and stimulating the economy and, notably, is likely to welcome finding an opportunity to enable States to find ways to increase tax revenue – and taxing so-called ‘sin’ industries may not be such an objectionable idea.

Stay tuned and, of course, if you have any questions, want further information or need help, don’t hesitate to contact me, Joe Rosenbaum, or any of the attorneys you regularly work with at Rimon.

mHealth – Mobile Health Care

Last year, I was invited to participate in and present a paper at the “mHealth and the Law Workshop” in Washington, D.C. [See mHealth – The Future of Mobile Health Care].

Then last month, I was invited to participate in a panel at the Mobile FirstLook 2015 Conference in New York, and as a result of my participation, the editors of Mobile Marketer asked if they could republish (with attribution of course), the paper.

In case you missed it, you can view “Exploring legal challenges to fulfilling the potential of mHealth” online, or you can download the original from the Legal Bytes posting above.

As always, if you have questions, or need advice or guidance, just contact me, Joe Rosenbaum, or the lawyer with whom you regularly work at Rimon.

Thank You for 2014 – Best Wishes for 2015

This is the time of year when many of you are celebrating holidays; spending time with family, friends and loved ones; bidding farewell to 2014; and looking forward to the New Year – 2015. A time when many of us pause to reflect on the past year and wonder what the new year will bring. There are people who have touched us and some with whom we’ve gotten closer; some we have missed and many with whom we resolve to try and be better in the new year; and perhaps a few we might like to forget. We remember those who are no longer with us and appreciate that by remembering them, we keep their spirit – all we have learned from them and all they have meant to us – alive. As 2014 comes to an end, we reflect on friendships and experiences, and use the opportunity to thank those who have helped us in tough times, and those with whom we cherish sharing the good times.

For me, it’s a time to resolve to keep doing the good things I’ve done this past year and to be better about trying to do those things I should have done. This time of year gives me an excuse to say thank you and express appreciation to all those who have enriched my life. If you are reading this, you are part of my audience – part of the fabric of my professional life and, like the threads of that fabric, you have helped me weave the patterns and textures you read in these digital pages. I am grateful for your readership and, in some cases, your friendship. I am always appreciative when you take a moment to read and maybe gain some insight, while being a little entertained.

Thank You

Continue reading “Thank You for 2014 – Best Wishes for 2015”

Fraud in Digital Advertising – ANA Report Released

Yesterday (December 9), the Association of National Advertisers (ANA) released a study, “The Bot Baseline: Fraud in Digital Advertising,” exposing the significant fraud present in media buying on the Internet. The losses to the industry for fraudulent, non-human web traffic are billions per year. Doug Wood, Joe Rosenbaum, Todd Mumford and Debra Dermody worked with the ANA on the project, including suggested language for future contracts that addresses non-human web traffic. You can read and download the entire study or the executive summary originally made available to ANA members, entitled “ANA/White Ops Bot Fraud Initiative, Preview for ANA Member Participants” or both.

As always, if you have questions, need help, want guidance or want to know more about Rimon’s advertising, technology and media practice and its resources, experience and capabilities, feel free to contact me, Joe Rosenbaum (joseph.rosenbaum@rimonlaw.com), any of the other lawyers who assisted in the preparation of the report or any lawyer with whom you regularly work at Rimon (rimonlaw.com).

mHealth – The Future of Mobile Health Care

Last month, I had the privilege of being invited to attend and make a presentation at an mHealth and the Law Workshop in Washington, D.C., convened by the American Association for the Advancement of Science, and supported by a grant from the Robert Wood Johnson Foundation. As part my presentation (October 7), I was asked to prepare a brief corresponding paper prognosticating the future of mobile medicine and health care. With permission of the AAAS, I am happy to share that paper with readers of Legal Bytes, and you can read the paper or download a copy for your personal use, right here: mHealth: Looking Forward [PDF].

As always, if you have questions, or need advice or guidance, just contact me, Joe Rosenbaum, or the lawyer with whom you regularly work at Rimon.

What One Lawyer Has Learned About Social Media (But There Are Still 5 Days Left)

Last week I received a novel invitation – call it a ‘dare’ from a long-time colleague and friend in a faraway land. He and I have never actually met, but we have interacted so often professionally and we keep trying to figure out how and when we can end up at the same conference, perhaps even sharing a speaking opportunity or panel so we can finally say ‘Hello’ in person – even split a bottle of wine. The invitation was a novel twist on attracting speakers to a professional conference – specifically the 2014 Webit Global Conference to be held in Istanbul.

Although the agenda was pretty full already, the organizers decided to create some ‘buzz’ by allowing people to vote for a few speaking slots as “Audience Choice” selections. Imagine that, a professional conference with a ‘power to the people’ format. While obviously hoping to increase attendance and excitement for the conference, the balloting is online and you don’t have to be registered to vote.

Now I’m wise enough, with enough experience, to appreciate that a practicing lawyer will NEVER win a popularity contest. I mean seriously – who normally says “I love my lawyer and really want to hear him talk!” I believe this to be true, even if we aren’t charging by the hour!

But I do love a good challenge and I thought it would be a good opportunity to conduct an informal, completely unofficial and invalid experiment. So I sent requests to people I’m connected to on LinkedIn, tweeted on Twitter and provided a link, with ‘Please vote for my presentation’ on my email signature block. Here is what I know and what I learned so far:

1. On this Legal Bytes blog, there have been more than 120,000 visitors, with 76,000 of them unique. So far just this month, there have been more than 2,500 visits. My own contacts – friends, family, professional colleagues, adversaries and people I have met over the years – number well over 6,000. As of this morning, I had 3,677 direct connections on LinkedIn. That means, according to the platform, there are 18,240,386 professionals in my network. That’s more than 18 million people! Eat your heart out Ellen and Ashton! Who’s ‘trending’ now?

2. Although Legal Bytes gets posted on Facebook, I don’t use Facebook otherwise and I only have a little over 480 ‘followers’ on Twitter (most of whom I don’t know), but that may simply be because my tweets, like my Facebook posts, are simply feeds from my blog. Perhaps those other 76,000 people are getting their information here and don’t need to duplicate it on Facebook or Twitter. Further study may be required (not really).

3. If you don’t have a Facebook profile, the organizers won’t let you vote – an interesting condition for a professional conference. Not sure why they didn’t pick a different platform or not require any pre-condition of membership in a network.

4. The organizers apparently won’t let you vote even if you are registered with Facebook, if you don’t have enough ‘friends’ on your profile (a few of my lawyer friends tried to vote and they are just as unpopular as I am). I’m guessing the conference organizers only want people who can spread the word to lots of others.

5. As of this morning I had 92 (yes, 92) votes.  Although I can’t really tell how many total potential speakers entered the contest, I am number 234 and some people have almost 1,000 votes already.

So far, my little experiment has led me to the following observations:

(a) My connections don’t vote, don’t want to vote or are out of the office and will get back to me as soon as they return;
(b) My connections really don’t like lawyers;
(c) My connections either don’t like this lawyer; prefer not to vote for this lawyer; prefer not to vote at all; didn’t qualify to vote (I may ask for a recount); or didn’t like the description.
(d) My thousands, hundreds of thousands and even millions of linked and networked connections don’t mean that much – it’s the people who know me that really count.


Perhaps there are or will be other lessons. After all, there are still 5 days left and if I ultimately end up with more than 18 million votes, I will be forced to admit I was totally wrong about the real power of social networks.

Health Care in the Clouds: Not Always Fine on Cloud 9

Many of you are already familiar with the series of individual and topical cloud computing white papers that we launched in 2011. We spent the next months and years compiling these articles into a comprehensive work entitled, “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing.”

The Consumer Finance Law Quarterly Report previously published two of our articles associated with “cloud-related” legal issues: The first applicable to financial services [65 Consumer Fin. L. Q. Rep. 57 (2011)] and the second related to advertising and marketing [65 Consumer Fin. L. Q. Rep 431 (2011)].

Recently, Joe Rosenbaum and Nancy Bonifant were privileged to have an article they wrote published as the third in the Consumer Finance Law Quarterly Reporter’s cloud computing series, and you can read the article right here: “Health Care in the Cloud: Think You Are Doing Fine on Cloud Nine? Think Again. Better Get Off My Cloud” [67 Consumer Fin. L. Q. Rep 367 (2013)]. The article represents an updated version of the article originally posted right here on Legal Bytes [See Transcending the Cloud – Health Care on Cloud 9? Are You Doing Fine?].

For more information about the implications of cloud computing and technology on health care, privacy compliance, and related legal matters, feel free to contact me, Joe Rosenbaum, or Nancy Bonifant or the Rimon attorney with whom you regularly work, and we can make sure you get the guidance and help you need to navigate the clouds.

Entertainment Media Crowd Funding Oscar (No, Not That One)

In 1918 there were no Academy Awards. But there was another Oscar! Oscar Micheaux, who taught us something about financing media and entertainment projects – perhaps the first crowd funding entrepreneur in the publishing and motion picture industry.

If you would like to know more about crowd funding and what’s new and what’s next (and about Oscar), you can read about it in Volume 25, Issue 3 of the Entertainment Law Review, where an article about crowd funding, authored by Joseph I. Rosenbaum, was first published by Sweet and Maxwell in London (a Thomson Reuters (Professional) UK Limited company.

You can read Joe’s entire article or download the PDF for your own personal use (i.e., not for redistribution) right here: Crowd Funding – A Funny Thing Happened on the Way to the Investment Bank. [PDF]

As always, if you want to know more about Crowd Funding (or any other matter requiring legal representation, counsel or guidance, please contact me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

Bot Fraud – Brand New Ways to Protect Your Brand

Next Tuesday, May 13, 2014 at 1 p.m. EDT, the Association of National Advertisers (ANA) will be providing a complimentary webinar entitled:

Bot Fraud: How to Protect Your Company and Brand

Bots—computer-generated, phony website visitors designed to mimic real traffic and trick advertisers into paying for non-human traffic—are a serious problem for digital marketers, causing damage in terms of CPM, revenue, and reputation. As this problem grows more prolific (and the bot technology more sophisticated), it’s imperative for advertisers and marketers to learn how to protect their companies and their brands.

To register and learn more, visit the ANA’s website.

Date and Time: Tuesday, May 13, 2014, 1 p.m. EDT

Bot Fraud: How to Protect Your Company and Your Brand is part of a series of complimentary webinars from the ANA Government Relations group focused on legal and regulatory issues currently affecting the marketing community.