Last week Jeremy Corbyn gave a lecture at the Edinburgh International Television Festival, outlining how a Labour government would reform the UK media industry via a series of radical proposals – including a windfall tax on tech giants. Mr Corbyn suggested the tax, as well as a digital licence fee, would fund independent “public interest journalism”, and would be enforced should the government fail to reach an agreement with big tech firms as France did with Google in 2013.
Former French President Francois Hollande and Google's ex-chief executive Eric Schmidt settled an ad revenue dispute with the creation of a £52m fund to finance French digital publishing innovation. A similar deal was reached in Belgium after a six-year copyright battle in 2012. These settlements were hard-won, so it is far from certain whether they could be replicated between the tech titans and a new Labour government.
Corbyn’s suggestion of a windfall tax must, then, be taken seriously – and he is by no means alone in a national chill towards American tech firms. Earlier this month, Treasury minister Mel Stride suggested a digital revenue levy on Google-owner Alphabet (US:GOOGL) and Facebook (US:FB.). In June, ITV's (ITV) chief executive Dame Carolyn McCall called for American tech giants to operate on a level tax and regulatory playing field in Britain.
But current UK tax systems are not fit to deal with the big international tech firms: this year Amazon paid just £1.7m in tax despite a near-trebling of profits. The UK and the EU are working to introduce a new global system, with the Organisation for Economic Co-operation and Development (OECD), which advises on international taxation. Yet the data and platforms that the so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) possess give them innate structural advantages that will take some time to regulate. It is therefore unlikely that a UK windfall tax, if enforced, would severely hurt the FAANGs. But Mr Corbyn’s proposal is another sign of mounting tension between European politicians and American tech titans.
The opposition leader’s speech also targeted the political influence of media organisations in the UK. He suggested enforced shareholder dilutions of all outlets over a certain size, with equity and board membership handed to staff and readers. In the Trumpian age of 'fake news', Mr Corbyn envisions that this move will cut off the power of “media barons” and make editors more accountable to their staff and audience.
An enforced dilution would see a per share decline in earnings and book value and weaken the claim of existing shareholders on earnings and assets – a further blow for UK newspapers, as the demand for traditional print journalism declines and ad revenue suffers at the hands of Facebook and Google.
Mr Corbyn claimed that limiting proprietors' and editors' control of their outlets was a necessary reform to end the “stranglehold of elite power and billionaire domination over large parts of our media”. However, it is worth noting that this proposal, and his others, were vague. The lecture left out key details, for example the size of media companies that would require an enforced dilution. Tom Watson, deputy leader of the Labour party, stressed that they were not formal policy propositions.
