Australia Taxes Big Tech Companies That Don't Pay News Publishers

Australia announced draft legislation this week that would charge Meta, Google, and TikTok a 2.25% tax on their Australian earnings if they don't negotiate payment deals with local news outlets. Parliament is expected to vote on the proposal in July.

The new law builds on an earlier 2021 rule that asked these platforms to work out payment deals with news publishers. That older law relied on companies choosing to cooperate. The new approach is stricter: platforms must either sign payment agreements with Australian news outlets or pay the tax.

How the Tax Works

The tax only applies to platforms that earn above a certain amount in Australia, though the government hasn't announced the exact earnings threshold yet. The 2.25% tax is calculated on the platform's Australian revenue only.

Google has criticized the plan, saying the tax "risks the ongoing viability of commercial deals with news publishers in Australia." The company argues that instead of helping news outlets, the tax might actually discourage platforms from making voluntary payment deals.

Who Supports It

Australia's major news organizations — Nine Entertainment, ABC, and News Corp Australia — say the tax is necessary to save Australian journalism. These are normally competing news outlets, but they've joined together to support the law. This shows how serious the financial crisis is for news publishers, who have seen advertising dollars move to social media and search engines.

Learning from Other Countries

Other countries have tried similar approaches. Spain introduced a similar rule years ago that taxed platforms for showing news headlines, and Google responded by simply stopping the display of news content on its search results in Spain. Spanish news readers suddenly had a harder time finding news.

Australia's approach is designed to avoid this outcome. Instead of taxing platforms based on how much news content they use, the new law creates a financial incentive to make deals. The government is trying to find a middle ground between forcing companies to cooperate and letting them do whatever they want.

The broader context here is that governments around the world have been struggling with the same problem for several years. France, Canada, and the UK have all created their own versions of rules meant to make platforms pay news publishers, with mixed results. Some of these approaches work better than others at actually getting payments flowing to news outlets.

The Accounting Problem

One real challenge is figuring out how much money a global platform actually makes in Australia. These platforms use complex advertising systems that operate worldwide. An advertisement might be viewed in Australia but sold by a company in another country, making it unclear where the money actually came from.

Platforms will need to create new ways of tracking and reporting their Australian earnings separately from the rest of the world. This work could be expensive and complicated, which might influence whether platforms decide to just pay the tax or negotiate a deal instead.

Other Support for News

Australia is also using other tools to help news media, beyond forcing platforms to pay. The government offers tax breaks for people who work in journalism, tax credits for people who subscribe to news websites, and special tax status for certain news operations. This multi-layered approach recognizes that platform payments alone won't fix all the problems facing news publishers.

The core issue is that the old advertising-based business model for news has broken down. Advertisers now prefer to buy ads on Facebook and Google instead of on news websites. Smaller news outlets can't survive on subscriptions alone because they don't have the brand reputation to charge readers. Large outlets in major cities have had better success charging for access.

The Timeline and Risk

It's worth noting that the government plans to move on this legislation very quickly, with a parliamentary vote set for July 2. This compressed timeline means platforms and news publishers may not have much time to work out their positions or identify problems with the law. The speed could be a problem if important details need to be fixed.

This proposal marks a significant shift in how governments handle the relationship between tech platforms and news outlets. Instead of asking companies to cooperate, Australia is now threatening financial consequences. Whether this approach actually works better than what Spain, Canada, and other countries have tried is something we'll only learn over time.