technology

NZ a virtual spectator in global drive to rein in Big Tech

Silicon Valley is at the heart of scandal after scandal, from privacy concerns to online hate speech to tax avoidance and election interference, prompting Marc Daalder to look at one of the big eight questions for 2020: will New Zealand regulate Big Tech?

Around the world, countries are getting tired of Big Tech's seeming impunity on a wide range of issues. In Europe, the EU cracked down on online privacy with the introduction of the General Data Protection Regulation, which came into force in 2018.

In France, President Emmanuel Macron backed down on Tuesday from a threat to tax multinational tech giants for three percent of their French revenue after President Donald Trump said he would retaliate with billions in tariffs, but patience is wearing thin as the OECD scrambles to come up with a solution for taxing Silicon Valley.

In Washington last week, the head of the Anti-Defamation League, a prominent civil rights group, told Congress to regulate Facebook, Twitter and other social networks if they won't curb hate speech of their own accord.

At the same time, the US is pressuring other countries, in particular the United Kingdom, not to allow Huawei to design 5G infrastructure over concerns that the Chinese company could pose a security risk.

Can New Zealand even make a difference in this tangled web of allegiances and issues?

Without a doubt. After the March 15 terror attack, New Zealand launched the Christchurch Call, which has galvanised efforts to rid the internet of violent terrorist content. Networks set up by the Christchurch Call were used to prevent the spread of the livestream of an October synagogue shooting in Germany, with a measure of success.

The Christchurch Call provides a model for more multinational efforts to regulate Big Tech - bringing countries and companies together to cooperate towards a common goal. The OECD is working on something similar with regards to tax avoidance, but tech companies are less eager to pay their fair share than they are to stop the spread of extremist content.

New Zealand is a small player and unilateral action - such as that taken by Australia with regard to terrorist content or by France, Austria, Turkey, Italy and India with regard to taxes - will have little to no impact. International cooperation is New Zealand's best bet to make an impression on the world stage, particularly with a globally-popular leader in Jacinda Ardern.

Will New Zealand act alone anyway?

On a handful of issues, New Zealand has acted or will act unilaterally. Ardern has shied away from the sorts of wide-ranging crackdowns on terrorist content that were imposed by Australia after March 15, but she has shown a willingness to regulate internet content at home to some degree.

Less than a week after the shooting in Germany, Ardern announced that the Government was looking into a voluntary nationwide internet filter for violent extremist content similar to the one already operating for child sexual abuse material. The announcement came after months of pleas from ISPs to institute some form of regulatory framework for taking down such content after Vodafone, Spark and 2degrees had to coordinate a hasty and error-prone response to the Christchurch shooting in March.

New Zealand is also on the verge of passing a major update to the Privacy Act, which will buoy the powers of the Privacy Commissioner. The Commissioner will now be able to issue compliance notices to organisations that breach the Act and will impose a mandatory notification requirement on organisations that suffer a harmful data breach.

On tax, New Zealand floated the idea of a digital services tax (DST) modelled on Macron's abortive proposal in 2019. The DST is still being consulted on and has been framed as a stopgap measure while the OECD puts the finishing touches on its own multilateral approach to tax.

Tax remains a sticking point

The OECD is currently working on a two-tiered approach to taxing big tech companies and other multinationals. The first would give a bigger portion of the profits of multinational companies to market countries like New Zealand while the second would require them to pay a minimum level of tax on those profits. This approach isn't limited to digital companies and will likely affect all large multinationals, including some New Zealand exporters.

The OECD will decide on January 30 whether to progress a draft of the first tier that was released in October. Countries would then decide whether to adopt it by mid-2020.

"New Zealand is currently working at the OECD to seek an international consensus to ensure multinationals pay their fair share of tax. It is part of renewed efforts by the OECD to develop a proposal known as the Unified Approach," Revenue Minister Stuart Nash said.

"The significance of the digital economy is only going to grow over the coming decades. The system needs to keep adapting to ensure multinationals who do business here pay their fair share of tax."

Virtual taxes

In 2013, the most recent year for which data is available, Amazon Web Services paid just $7,720 in income tax to New Zealand. The same year, Facebook paid just $23,000, though that increased to $43,000 the next year. In 2017 and 2018, Google paid just under $400,000 in income tax to New Zealand. These companies are estimated to have made hundreds of millions of dollars in revenue.

"There is a huge amount of revenue that could go towards New Zealand’s schools and hospitals from Big Tech through taxes that at the moment they largely avoid paying," Green Party technology spokesperson Gareth Hughes said.

Privacy powers "light-handed"

New Zealand's privacy law, Commissioner John Edwards says, is a "fairly light-handed, principle-based, technology-neutral model.

"So the approach has endured from the 1990s and it has served us reasonably well, but it has got a little bit out of date."

The new Privacy Act will strengthen Edwards' powers. As it stands, there is no requirement for companies or agencies to notify affected users if their data is exposed during a breach. The new law will obligate notification of both affected users and Edwards himself if they "experience a privacy breach that could cause serious harm".

It will also allow Edwards to issue compliance notices where "we find that an organisation is not meeting its obligations". Organisations then have a legal duty to comply with the notice or else they can be taken to the Human Rights Review Tribunal, which can impose a maximum penalty of $10,000.

The Act still falls short in enforcement as compared to other jurisdictions. "Where we have fallen behind Europe is the ways in which [transparency] rules have been enforced," Edwards said. "Europe has financial penalties for breaches and the New Zealand Parliament has decided not to go in that direction for New Zealand. It does have this quasi-judicial oversight but without the force of sanctions behind the GDPR which [can charge] four percent of global revenue or 20 million euros."

Edwards also points to an "international trend to greater consumer demand for transparency about how their information is used and more consumer sensitivity about unexpected uses of personal information". This could alter how tech companies behave globally, which Kiwis would benefit from.

Hate speech and Huawei also a concern

There are ongoing sagas in New Zealand related to online hate speech and the possibility of Huawei becoming involved in the country's 5G infrastructure. Bernard Hickey described the complex issues going into New Zealand's potential decision to let Huawei operate here in another of the big 8 question series.

In short, New Zealand is stuck between the United States and Australia, which have turned their backs on Huawei, and the United Kingdom and Canada, which are more eager to use the company's services, on the other. Rob Ayson illustrated how New Zealand has kept its position intentionally vague in an effort to keep China happy and retain its position in the Five Eyes intelligence sharing network.

Look forward in the coming weeks to a decision from Boris Johnson on Huawei. If, as seems likely, he permits the company to operate in the UK, then New Zealand and Canada have a lot more leeway to follow suit.

On hate speech, the Government announced a review of existing laws after March 15. Green MP Golriz Ghahraman, who called for such an action in 2018, said she wanted "all groups affected by prejudice and discrimination to be included in the protection of the law to include sexual orientation, gender, religion, and disability groups - all of which are currently left out."

"Accountability of multi-billion dollar corporations, or individuals, has to be robust enough to protect marginalised groups and our whole community. We learned last year that as a nation we are not immune from dangerous speech, which is why our Prime Minister has also led the conversation about accountability on the international stage," Ghahraman said.

The review is ongoing.

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This was the sixth in the ongoing series on Newsroom Pro of the 8 Big Questions for 2020.

1. Will Labour win a second term?

2. Will Donald Trump be re-elected and should we care?

3. Will New Zealand let Huawei build any part of Spark's network?

4. Will Rio Tinto shut down Tiwai Pt?

5. Will NZME and Stuff merge?

6. Will New Zealand regulate Big Tech?

7. Will New Zealand conclude a trade deal with the EU and or UK?

8. Will the Government appoint an Auckland Light Rail builder?

Get it early – This article was first published on Newsroom Pro and/or included in Bernard Hickey’s ‘8 Things’ morning email of the latest in-depth business and political analysis. Get it early by subscribing now or starting a 28-day free trial.

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