Tag Archives: advertising

Unlocking the value of data key to UK economic growth

The Scottish government has identified data-driven innovation as a key area for potential economic growth, and they plan to invest accordingly. Rachel Aldighieri, MD of the DMA, highlights the need for cross-sector collaboration to discover the true worth of data.

Earlier this month, Theresa May signed the Edinburgh and South East Scotland City Region Deal with Nicola Sturgeon. Along with other cultural and economic developments, the deal seeks to invest in the fintech, tech and AI sectors, and will ring-fence money to develop data storage and analysis centres in the Scottish capital.

Key commitments include £300m for world-leading data innovation centres; a £25m regional skills programme to support improved career opportunities for disadvantaged groups; and £65m of new funding for housing to unlock strategic development sites.

Over recent years, the Scottish Government has regularly issued support for the tech, data and marketing industries, identifying the central belt as a key area for growth. The value of the digital economy in Scotland was estimated to be £4.45 billion in 2014. Data-driven innovation alone has the potential to deliver £20 billion of productivity benefits for the economy over the next five years.

The prize is an innovative, growing economy.

Advertising and marketing are at the heart of the UK economy and play a vital role in driving economic growth. Annual UK exports of advertising services are worth £4.1 bn and every £1 spent on advertising returns £6 to the economy, resulting in £120bn to UK GDP.

The Scottish government’s recent investment should provide a platform for the rest of the UK to build on – a pilot project that will highlight the potential of the data and marketing industries to continue to drive the post-Brexit British economy.

Marketers need training in data-related skills

The publicity of the Edinburgh and South East Scotland City Region Deal should help to put the data and marketing industries on the radar of those making career choices in the future.

However, the industry needs to develop stronger ties with academic institutions to increase awareness about the skills required for a role within the data-driven industries and provide insights into the career prospects that these positions can offer. DMA Talent runs a series of Creative Data Academies around the UK to provide practical learning opportunities for young talent interested in a career in the data and marketing industry. Working with Scottish universities, we’ll be developing this programme with a long term aim of reaching schools and colleges throughout the UK.

As both the Scottish and UK governments have realised, businesses will need to upskill in areas concerned with data and its value to business. The recent ‘Professional skills census 2018’ from the Institute of Direct and Digital Marketing (IDM) highlights ‘data-related skills’ as a key area with skills gaps that need to be addressed. In a post-GDPR era, marketers are held more accountable for their actions, but they must receive relevant training and guidance to better understand their evolving roles – where processing consumer data and interpreting it are now key areas of their job description.

Developing an ethical framework for processing data The DMA’s ‘Data privacy: What the consumer really thinks’ report highlights that 88% of consumers believe transparency is key to increasing trust in how their data is collected and used. The research also revealed an important change in attitudes is underway, with more than half (51%) of the respondents viewing data as essential to the smooth running of the modern economy, up sharply from 38% in 2012.

Ultimately, consumers want more control over their personal information but the industry can do more to increase consumer trust, define best practice, and safeguard data usage. The DMA Code provides a series of core guiding principles to our membership for processing consumer data and it encourages best practice within the marketing and data industries.

We are working with our members to give businesses a better understanding of the values of data and shape the responsible route forward. However, an ethical framework for processing data that extends beyond our industry will be key if the UK economy is to thrive on the opportunities presented by technological advances.

The government’s development of the Centre for Data Ethics and Innovation will go some way to dealing with the ethical issues raised by rapidly-developing technologies such as artificial intelligence (AI).

The Centre for Data Ethics and Innovation will encourage discussion and research into how data and AI are used in terms of governance and regulation, but more investment will be required for the rest of the UK to follow Scotland’s lead in seeking data-driven innovation.

It is only by putting the customer first and embedding an ethical approach to business culture that consumers and organisations alike will be able to take full advantage of the data revolution. If we don’t get the balance right between data privacy and data-driven innovation, personal data may be misused by some businesses as technology advances. Technology often shapes an organisation’s customer engagement strategy, but our research has shown that trust will influence how receptive and likely consumers are to use it. A practical, universal framework is needed but this will require investment and cross-industry collaboration.

The department of Digital, Culture, Media, and Sport (DCMS) works closely with the DMA on championing innovation and evolution in the data and marketing industries, and the DMA welcomes future discussions around how we can develop and implement such a framework.

To propel the discussion forward, the DMA and DMA Scotland will launch a new initiative entitled Value of data.

This work will seek partnerships with government, businesses and educational institutions to develop a consumer-focused mindset within the data and marketing industries.

Led by Chair Firas Khnaisser (Standard Life) and Vice Chair Derek Lennox (Sainsbury’s Bank), Value of data will help businesses to responsibly deliver value to their customers.

The campaign will provide an engaging, navigable roadmap through a challenging ethical and legal landscape to allow innovative and data-led approaches to customer engagement to thrive. And we’ll do it all with a future-focus: nurturing local and young talent.

Ultimately, the Value of data will develop a true appreciation of the worth of data so businesses can build stronger, more profitable relationships with consumers – responsibly, sustainably and ethically.

The DMA are ready to work alongside our membership, the wider marketing industry, and UK Government to make this a reality in the not too distant future.

source: www.thedrum.com

Tax Department’s Consultation On Digital Taxation May End Up Being An Academic Exercise, Experts Say

taxationTechnology giants like Facebook, Google, Amazon, Alibaba and other such digital companies derive considerable value from a large user base. For instance, some digital companies sell user data for targeted advertising. It’s this value that nations now want to tax.

Europe, for instance, has proposed a tax on turnover. Australia is mulling a tax on digital advertising. Singapore has announced a sales tax on digital services, starting 2020. India isn’t far behind either.

Digital advertising on foreign platforms is already under the tax net, also known as the equalisation levy. But now, India now wants to tax the business profits of digital companies, for which the taxman has reached out to various stakeholders for consultation. Experts told BloombergQuint the move will run into two problems: attribution of profits among countries i.e. who can tax how much, and treaty troubles.

Digital Services: What Gets Taxed?

Two years ago, the government imposed a 6 percent tax on digital advertising, which is attracted when an Indian resident or a non-resident with a fixed place of business in the country advertises online with a service provider with no permanent establishment in India. Permanent establishment is, in tax parlance, a fixed place of business. The levy is applicable if the transaction value exceeds Rs 1 lakh in a financial year. Reportedly, this levy has added close to Rs 3,000 crore to tax collections in the last two years.

Equalisation levy is applicable on advertising revenues and the administration of it has been smooth in the last two years, Sudhir Kapadia, partner and national tax leader at EY India, told BloombergQuint. It’s a tax on business-to-business transactions and the law has ensured there’s no double taxation, he said.

There is no income tax in the hands of a non-resident once the equalisation levy is discharged. So, it is a proxy for any kind of income tax liability that can be levied on the company concerned.Sudhir Kapadia, Partner, EY India

What About B2C Transactions?

Enter, Significant Economic Presence. In budget 2018, the government proposed to get its fair share of tax from business-to-consumer transactions by introducing the concept of significant economic presence. According to the finance minister, the idea is to tax profits of those digital businesses that don’t have a physical presence in India but derive significant economic value from the country.

India’s belief is that we follow strict source-based rules of taxation; our domestic law and treaty definitions of permanent establishment have lost their relevance because of the digital invasion, Mukesh Butani, managing partner at BMR Legal, said.

A lot of foreign luxury goods and garment manufacturers don’t have a physical presence in India. You can use an Amazon platform and order those goods, or you can go to the company’s website and order. But you can’t tax those activities in India, assuming they don’t have presence here. Under this significant economic presence, such activities will come under the tax net.

Mukesh Butani, Managing Partner, BMR Legal

What Does The Tax Department Want To Know?

In one word, thresholds. The department has asked for consultation on:

  • Revenue threshold of transactions with respect to physical goods or services carried out by a non-resident in India.
  • Revenue threshold of transactions pertaining to digital goods or services or property, including the provision of download of data or software.
  • Threshold for number of “users” with whom systematic and continuous soliciting of business activities is done through digital means.

To begin with, the phrase used in our law is significant economic presence and not just digital presence as is the case in Europe, Kapadia said. The first element on which consultation is sought is about transactions involving physical goods and so, our approach is far more overarching, he added.

The budget memorandum only talked about digital economy, but this would include all transactions of import of goods, which currently attract only customs duty. For example, EPC contracts, manufacturing, supplies from vendors etc who do not have a presence in India.

Sudhir Kapadia, Partner, EY India

If India is determined to bring this, revenue threshold for digital goods and services and user threshold can be akin to what the E.U. has proposed, he said.

Europe has proposed a three percent tax on businesses with E.U. digital revenues of over 50 million euros and total global revenues of over 750 million euros. Revenues derived from online advertising, sale of user data and online marketplaces will attract this levy.

So, What’s The Problem?

The first is profit attribution. Or, how should governments determine the revenue attributable to digital activities in their country.

It’s going to be very difficult for India or any other country to ascertain this since the conventional principles of permanent establishment won’t apply to digital businesses, Kapadia said. He explained that data about users in other countries, revenues collected in other countries arising from that user data isn’t easy to get despite the exchange of information arrangements.

 Currently, India has two provisions for attribution. Rule 10 of the Income Tax Rules which essentially says that revenues from India divided by global revenues multiplied by global profits should be the taxable base in India. This, in a brick-and-mortar space, poses enough challenges. It would be impossible to apply this principle in a digital business. Second is the arm’s length principle under transfer pricing. That can’t be the answer either since the entire functions, contractual and legal risks are outside of India in the digital business context.

Sudhir Kapadia, Partner, EY India

The second issue would be tax treaties. If the treaty problem isn’t addressed, this consultation will just be an academic exercise, Butani said.

When the law was passed in Budget 2018, it clearly said India is proposing this law in order to be prepared for the changes that occur in double-tax treaties, Butani said. This subordinate legislation that the department is proposing won’t be useful in situations where the non-resident tax payer is from a country that has a tax treaty with India, he added.

The definition of permanent establishment under the tax treaties don’t contemplate digital transactions. The only way is to amend the treaties using the multilateral instrument tool proposed by the Organisation for Economic Co-operation and Development. But if the treaty partner hasn’t signed up to MLI, the provision under the domestic law won’t help.

Mukesh Butani, Managing Partner, BMR Legal

You’re looking at a scenario where some treaties will trigger a digital permanent establishment and some treaties won’t, he said. So, how will a change in the domestic law affect the taxable position under these treaties, he added.