This past week Telecom and IT Minister Kapil Sibal asked four major Internet companies — Microsoft, Google, Facebook and Twitter — to screen and pre-censor user posts and comments. Soon afterwards, there was an Income Tax Department notice to Google India. It was accused of under-reporting income by crediting part of its revenue as distribution fees to Google Ireland.
It is possible the two events — Mr Sibal’s meeting with the Internet companies and the tax notice — are unrelated. Even so, given the suspect timing, not many would grant the UPA Government the benefit of the doubt. That aside, the Congress has a history to live up to (or perhaps to live down).
What is the case against Google? According to a person quoted in The Economic Times, it is this: “The earnings will come under tax net if the revenue is generated from India, even though the platform may be based offshore.” Those with long memories would recall a case involving Time magazine in the 1970s that seemed to follow a similar trajectory.
In his book Nani A Palkhivala: A Life (Hay House, 2007), MV Kamath writes of his subject as the champion of free speech that he was. The great Parsi lawyer was also one of India’s most noted taxation specialists. Both these attributes coalesced in one intriguing case 35 years ago, when a tax notice was served on the Time magazine bureau in New Delhi.
“The Government suddenly decided,” writes Kamath, “that the company that ran the magazine was making profits on the basis of news collected in India and was therefore liable to be taxed on the ground of ‘business connection’ under Section 9 of the Income Tax Act. This was an unheard of thing, and Bob Marshall of Time Incorporated’s legal department described it as ‘a unique theory’.”
The tax notice was served in March 1976, at the height of the Emergency. Though it purportedly related to earnings in 1973, it was clear Time was paying for independent coverage of affairs in India. This was noticed by the international Press, just as the clumsy attempt to pre-censor Facebook posts and Twitter tweets has been ridiculed in many circles today.
In 1976, the New York Times wrote an editorial on the issue: “There’s no denying the Indians’ ingenuity. If this thing sticks, there’s a whole new tax world to be conquered: New exit fees for all pale-skinned travellers, depending on the amount of Indian sun they have absorbed; a tax on every globe and map that profits from showing the subcontinent’s location; perpetual royalties from an array of diaries and novels, starting, of course, with EM Forster’s most profitable A Passage to India.”
“The paper went on to suggest,” Kamath writes, “that if tax revenues slackened, Indira Gandhi could declare war on Pakistan and let tax revenues on war reportage pay for the cost of the war.” This business was as serious as it was comic.
The case went on for six years. Finally, looking silly, the Government backed down, got Parliament to amend Section 9 of the Income Tax Act with retrospective effect, and agreed to the Delhi High Court quickly giving a verdict in favour of Time magazine.
Through this period, Palkhivala was Time magazine’s lawyer. He anticipated a victory in court, since the case was “misconceived in law”. “News gathering could never result in the accrual or ‘deemed’ accrual of income,” he pointed out, “if the law were otherwise, all countries would tax a notional income arising out of news gathering … On such grounds the exchequers of the Falkland Islands and Lebanon would have been overflowing by now.”
One has no idea if Google India’s defence is anything as strong as Time magazine’s, or if the Internet giant has a lawyer with the spirit and gusto of Palkhivala. Yet those are beside the point. The telling fact is the Congress’s instinct has been and is to use different arms of the state to “manage the media”. India has changed in the past four decades, but the Congress’s default position has not.
That is why Mr Sibal’s proposal on control of content has triggered such misgivings. Social media is still an evolving area. It is not, as any of its enthusiastic adherents like to describe it, an anarchy. Rather, it is something that at least conceptually resembles anarchy: A perfectly free market, in a state of perfect competition, with unrestrained entry and exit for buyers and sellers, and one where every contention (or Facebook page or tweet) can at least theoretically have an equal and opposite contention (or Facebook page or tweet).
There is an appealing philosophy underpinning such a zero-sum, self-correcting framework, and yet there is also a utopian idealism. As such, social media needs rules and regulations as much as, in their own way, print and electronic media need rules and regulations. Of course the mechanism and type of rules and regulations will have to vary, given the intrinsic nature of each medium.
Given this, the alternative to Mr Sibal’s bad idea is a better idea; it can never be the absence of an idea. Those who argue social media must be left entirely to its devices and to the ability of an individual user to block or reject content are running away from the inevitable. They are being as unrealistic as those who believe pre-censorship is feasible and indeed the only way out.
So how should discourse on social media be insulated from uncivilised and inflammatory messages? Frankly, we don’t know. We are at the beginning of a long process of discovery, during which mistakes will be made and technology will always seem ahead of any regulator. What we do know, however, is that the Government cannot be given authority to regulate. It would be more in order for the industry itself, for the Internet companies, to devise and continually tweak systems in consultation with a variety of stakeholders, ranging from end-users to, of course, the Government.
Take for example the question of anonymous and pseudonymous postings, which are occasionally abusive and downright wild. The server and specific computer used to post offensive content can be traced but most everyday users wouldn’t have the time or inclination to do so. They would prefer their Internet interlocutor to be upfront about his identity. Could, say, Twitter incentivise users who tweet under verifiable names by perhaps giving them access to more services, quantitative or qualitative?
The answer lies in nudging the industry towards such options, not in the Government’s sledgehammer approach.
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