This weekend, media reported about the proposal of France to put a tax on user data. It is targeted at US-companies which make profits out of French citizens’ data, but don’t pay taxes in France (i.e. Google and the like). The idea is to not tax the profits, but put a tax on the resources (French citizens’ data) that are used. Besides being problematic to enforce, such a tax could also could have a huge impact on the way we deal with privacy.
From an economic point of view, such a tax might be useful. But without international agreements, it would probably be quite difficult to enforce such a tax. Furthermore, the question is how to measure and control the amount of user data to be taxed. If companies have to keep corresponding data for taxation purposes, this could be a privacy problem in its own.
However, the far bigger implications for privacy come from a different side. Since the collection of user data costs money, firms will try to cut down on it. This is a somewhat orthogonal approach to the current privacy legislation and thereby weakens the necessity for privacy legislation in the current way. However, this includes a shift in paradigms: Whether companies collect user data or not is not a question of legitimacy anymore, but a question of profitability.
By attaching a tax to user data, privacy gets a government-defined price. Analogous to emission-trading, companies are incentivized to only make use of privacy-infringement as much as it is needed to guarantee them profits. The price will likely be higher than the value users attach to their privacy (as can be seen with discount cards, that is quite low), but of course lower than the value firms attach to it. In any case, it leads to the following decision: As soon as the use of data is profitable enough, it is a reason to infringe the user’s privacy.
Although such a data tax would in the first place be an additional form of privacy regulation, I believe that the explicit notion of price will weaken the classic form of privacy regulation. Ultimately, this means a shift from legitimacy to profitability, what in case of a human right seems not suitable to me.