Remember when futurists told us that the internet would result in the “death of distance”? Why fly to a meeting or a drive to downtown office when cheap, high quality connectivity removes the need to travel? Geography would matter less as digital connectivity advanced.
That prophecy has fallen short, as cities remain hubs for commerce and community. Highways and mass transit continue to be crowded in metropolitan areas throughout the world. Not only does geography continue to be relevant, but recent policy developments show that geography’s importance is growing.
Two contemporary issues illustrate this. The first is the digital services tax, something several European Union states are considering and one that the UK has proposed. By specifying revenue and profit thresholds, as well as business lines, the tax is designed to make tech companies bear its burden.
The tax places a levy on the revenue of services provided in a particular location because, advocates say, of a “value creation mismatch”. Users of digital services contribute to their value (when, for example, user data helps sell targeted advertising) while the profits from those services accrue to companies whose operations are elsewhere.
Advocates of the digital tax argue that the imbalance can be corrected by taxing revenues of digital services in the places where tech companies provide them. The tax puts geography into the tax code for tech companies in a new way.
For one, the tax steadies a local tax base that may be eroded if tech companies supplant local service providers. Why shouldn’t tech companies, like local service providers, support the municipal services that enable customers to be productive and communities to thrive? After all, many people blame the rise in boarded-up shop fronts in cities, which reduces a government’s tax base, on competition from online vendors.
The second example where location comes into play is deployment of infrastructure for 5G wireless services. These services require a dense network of antennas for transmission, as well as extensive fibre-optic networks for data transport.
Network buildout requires.....