Typically, when a corporation makes use of a ‘resource’ or an asset, it makes a royalty payment to the owners or guardians of that asset. The size of the payment usually a proportion of the revenues generated.
That’s royalties in a nutshell, though it gets more complicated – different categories of assets (minerals, copyrights, etc), differently determined proportions of differently calculated revenues (gross, net, etc).
One category of asset though stands in stark contrast to the norm. Today corporations make use of it, generate phenomenal wealth from it, yet pay no royalties for the privilege.
That asset is data, the raw material underpinning the ‘knowledge economy’ of the ‘information age’.
Data is amenable to a royalties regime like other extracted resources, but is not treated thus.
Is it because data-based corporations differ from traditional resource companies? Where the traditional resource company mines the mountain, data-based corporations remove the entire mountain, and mine it elsewhere, for as often and as long as they like. Using Google as the example:
Google’s ‘Terms of Service’ explains that data an individual creates by using a Google service remains copyrighted and the property of that individual, except that in using the service, the individual grants Google the right to use that data pretty much any way it likes.*
The argument generally raised to support this state of affairs is that individuals grant corporations use of their data in exchange for the services corporations provide, and that this is a ‘fair’ exchange. To date, most people accept this.
However, a growing corpus of individuals and institutions are clearly concerned about the immense power these corporations are amassing, over individuals and populations alike, through the accumulation of big data.
Governments too are increasingly concerned at the lack of equitable compensation paid by corporations for the services governments provide to assist them conduct their business, particularly when those corporations use sophisticated ‘transfer pricing’ and ‘profit shifting’ mechanisms to minimise their tax obligations.
Governments might find relief knowing that, despite any agreements granting Google license to an individual’s data for the ‘limited purpose of operating, promoting and improving its services’, these Terms of Service would not inhibit the negotiation of a royalty regime over use of the asset.
Such a regime, negotiated and implemented globally, would give governments an opportunity to balance the data corporations’ rising power.
How might such a regime undermine profit shifting? With each corporation paying royalties in each constituency as a proportion of its total revenue, equivalent to the proportion of its total data upload originating from that constituency. The corporation pays where the data originates.
If a global royalty regime required all corporations to pay five percent of revenue generated with data, and two percent of the data a corporation uploaded came from a particular constituency, that corporation would hand over two percent of five percent of its revenue to that constituency.
At the global level a simple, straightforward five percent of all revenue generated from data, an arrangement not dissimilar to those negotiated with other resource corporations, with the global sum of amounts paid to various constituencies equaling five percent of global revenue.
Data-based corporations keep and use data for the long term, and might argue some data is worth more than other data. Making such an argument might require them to open their servers and algorithms to scrutiny. Faced with that option, they’d settle for paying the same royalty on all data just once.
A caveat: Governments in the developed world are opening up large tracts of data, as knowledge extracted from it is a driver of productivity and growth in their economies.
Arguably, a royalty regime might drag on this drive, disinclining the hunt for data-mining revenue if it implied compensating constituencies for use of this previously public good.
On the other hand, the payment of royalties would help governments to ‘claw something back’ on behalf of their citizens, as one economist put it.
It might even simplify the progress of Google and others through the quagmire of taxation inquiries in which they are ever so slowly slowly sinking.
In a nutshell: data is a resource for the use of which royalties might reasonably be paid.
* In fact, it even grants Google the right to use your image, together with your name, together with any comments you might make on a Google service, in advertising material to promote Google (unless you specifically opt out).