Tax Google, Facebook as telecom companies? Spain considering new law

Under the proposed rules internet companies such as Alphabet Inc. and Facebook Inc, would have to disclose their sales from messaging services in the country

Spain will seek to tax all companies that operate telecommunications services, such as calls and instant messaging, according to Telecommunications Secretary Roberto Sanchez.

Under a new law proposed by the government, "all operators who provide telecommunication services without having to provide phone numbers, such as WhatsApp" and Telegram would have to register as telecommunications operators and would be taxed based on revenue, Sanchez said in a press conference. Currently, only phone operators that can provide phone numbers need to sign up as telecom operators, he said.

Under the proposed rules, which would require parliamentary approval, internet companies such as Alphabet Inc. and Facebook Inc., the owner of WhatsApp, would have to disclose their sales from messaging services in the country, he said.

For a tech giant like Facebook, sales are largely driven by advertising. Given WhatsApp generates little revenue for the company, the impact in the short-term would be small if the law were to pass, said Ivan Feinseth, chief investment officer at Tigress Financial Partners.

Over the long term, messaging services will look to integrate into e-commerce platforms, creating more opportunities for revenue, he added.

In the past, there have been initiatives to regulate and tax internet services, such as Facebook and Google, like telecom providers. These efforts are fair to some extent because internet-based messaging has mostly replaced traditional texting from phone companies in most markets, according to industry consultant Chetan Sharma.

“But the expectations of delivery, especially for emergency services, is just not there and the burden is primarily on the operators,” he added. Companies such as Google and Facebook “obviously want free rein as any form of regulation makes them accountable which could lead to fines in case of non-compliance.”