First Moneyweb, now Google – why Naspers is challenging online rivals in court

There’s still a Wild West feel about South Africa’s online publishing sector. Having been involved in the field since its embryonic stage, I’ve watched opportunists prey on the ignorant since the days of the supposedly massive audience of virtual game reserve safari site Africam, which refreshed its pages every 20 seconds claiming each was a new visitor. It was this concern for what the miscreants were doing to our fledgling industry that a small group of us founded the Online Publisher’s Association in the late 1990s. Since then many of the more obvious abuses have been rooted out. But business practices have also far outpaced legislation, to the chagrin of industry players which believe they are unfairly treated. It is in this context that we need to assess the latest legal challenges by local online market leader Naspers – first in defending copyright abuse charges by my old company Moneyweb; and now in having a go at global giant Google which, Naspers claims, takes more than R1bn in online advertising from SA corporates, generating massive profit margins but paying no tax. On our CNBC Africa Power Lunch show today, we asked Naspers executive Geoff Cohen why his group is so eager for a fight. Google was not prepared to come onto the show but did provide a statement which was read at the end of the interview. – AH 

 

GUGULETHU MFUPHI: South Africa’s largest online publisher Naspers has accused Google of dubious tax practices.  Joining us now for more is Geoff Cohen Chief Executive of 24.com.  Geoff, you’re accusing Google of tax evasion or tax malpractices.  What is this based on?

GEOFF COHEN:  I think I need to clarify some of the decisions around this.  I think the first part around this is I don’t think for a moment we’re suggesting that anything Google is doing – or in fact, companies like Google are doing – is in any way illegal.  What they’re doing is absolutely legal.  It is absolutely within their rights to follow legislative practice inside South Africa and inside the tax codes of members of participating countries, so that’s not what we’re saying.  What we’re saying is that it’s becoming more and more apparent in a globally digital world that the legislative structures around, or the tax codes that have been written up, need to address the fact.  It is increasingly easy to raise revenue out of different geographies, for the benefit of companies based very, very far away without providing any of the returns back into the society that a similar company would have to produce if they were competing locally.  That’s certainly a better way that we would like to project the debate.

ALEC HOGG:   Why are you having a go at them now, Geoff?  You compete with Google all over the world; Brazil, China – well, not so much in China – in many of the geographies: Naspers and Google go head-to-head.  Here in South Africa, your home territory as it were, is an interesting place to start.  Are you going to be rolling out this campaign elsewhere?

GEOFF COHEN:  I think this is also an important point to make.  Quite often commentators contemplate any of Naspers’ many businesses as speaking for Naspers as a whole and that’s not necessarily so in this case.  In this case, I’m representing the interests of digital publishers active in South Africa and broadly, in Sub-Saharan Africa, rather than representing a Naspers point of view from a global perspective.  We’re a very small digital business in a very small part of the world, and we’re raising a flag along with a number of media owners.  We’re saying ‘let legislators take a look at this, and let’s have a discussion on whether or not this is a problem, whether global companies like Google, Facebook, and to a degree Apple, are benefitting at a higher ratio than local companies.  Are there things we should be doing to address potential levels of market dominance?

ALEC HOGG:   Can you quantify the benefit?

Geoff CohenGEOFF COHEN:  The easiest one for us to go for or to hang the argument on was really around the fairly aggressive tax practices that Google, and other companies like Google, practice.  If you had to take a theoretical line and say in theory, Google is extracting more than R1bn out of the local South African economy, you could apply a national corporate tax rate on that, and say that’s what the fiscus is losing out on overall.  You could push it further and say ‘it is not just the effect of the fiscus losing that revenue, but it’s also other media organisations or potential competitors – either directly or tangentially – that are prejudiced because they do have to pay taxes.  The short answer to that one is to say the hard number is potentially whatever the corporate tax rate or whatever the revenue rate in South Africa is.

ALEC HOGG:   Unfortunately, Julie Taylor the Communications Manager of Google, was unable to come onto the program.  However, she did send us statements.  Let’s just go through some of those.  Julie says “Google complies with tax laws in South Africa and every country where we operate.  Under current rules, VAT reporting and remittance is the responsibility of our advertisers who pay the same rate when they advertise with Google or any other company.  Also, the allegation that we do not pay PAYE tax is completely false.  PAYE is a payroll tax and we pay this for every employee in South Africa”.  She also says, “Google is committed to bringing users quality content as quickly and easily as possible, which is why we partner with valued publishers around the world who choose to list themselves in Google News”.  It’s a debate that has only just started.  Just before you go though, Geoff: any update on the fight between yourselves and Moneyweb?

GEOFF COHEN:  We’ve filed an answering affidavit, which is before the courts.  We’re waiting for the final response from Moneyweb, probably within the next ten days or so.  We’re quite keen on hearing more about it.  In fact, it’s a good debate to have, and if you look at that discussion along with the Google discussion; it’s really about taking a new opportunity to recraft laws that were drafted before the Internet was even dreamt of, which is quite exciting.

ALEC HOGG:   A good point: Geoff Cohen, Chief Executive of 24.com.

Visited 27 times, 1 visit(s) today