Resumé Debate: On a fair playing field, Google and Facebook would pay at least 1 billion SEK in taxes in Sweden. It’s time for Swedish politicians to act, writes Magnus Heljeberg, CEO of JCDecaux. 

The Swedish media market has undergone enormous changes over the last ten years. New digital players have taken market share, and previously dominant media companies have seen their business shrink significantly due to increasing competition for advertisers’ investments. The pace of change and the rise in competitive pressure is, to a large extent, astounding. It can truly be said that it is every company for itself on the Swedish media market, day by day, week by week, year by year. 

Increased competition, shorter lead times from creative idea to actual delivery on various marketing platforms, and the digitization of production and processes are all things to be welcomed. Sweden is a relatively small country in media terms and benefits from a dynamic and highly competitive media market. 

However, every market requires legislation and regulation where all players can compete on equal terms. For a functioning market economy, this is fundamental. Without a fair playing field, certain market players—those favored by lack of legislation and/or regulation—will have a significant competitive advantage over regulated companies. The end result could be that the heavily regulated companies are pushed out by their advantaged competitors, due to legislative favoritism. 

The Swedish media market does not have a level playing field today. The distortion of competition mainly consists of three parts: 

• Media companies that do not pay corporate tax relative to their actual revenue in the Swedish media market (Google and Facebook). 
• Media companies that effectively do not need to take responsibility for the advertising on their platforms (again, Google and Facebook). 
• Media companies forced to pay a turnover tax on analog advertisements (Outdoor and Direct Mail companies) in the form of a penalty tax of 7.65 percent. 

Regarding corporate tax, the following example can be given. Market statistics from IRM show that total media investments in Sweden for the entire year of 2017 were 37.725 billion SEK. Of these, 26 percent (9.8 billion SEK) went to Search Marketing, and 5.2 percent (1.96 billion SEK) to Social Networks. 

The Search Marketing sector is completely dominated by Google, and the Social Networks sector is completely dominated by Facebook. None of these advertising investments, totaling 11.7 billion SEK, are reported as taxable income in Sweden. Therefore, these two corporate giants pay zero (0) SEK in corporate tax in Sweden. 

For comparison, JCDecaux paid 25 million SEK in corporate and advertising taxes for the year 2017 on a turnover of approximately 300 million. If we assume that Google and Facebook would pay equivalent tax levels on a fair playing field, it would mean over 1 billion SEK extra for Swedish taxpayers just for the year 2017. This is conservatively calculated, as the actual profit margins in Sweden for these actors far exceed those of an outdoor company like JCDecaux, which holds around 0.8 percent market share of the Swedish media market, compared to Google and Facebook’s 32 percent. 

Regarding responsibility for advertising, it is often claimed that it is practically impossible for Facebook/Google to take responsibility for all the content on their platforms. The strict regulation that applies to other media based in Sweden, concerning bans on sexist advertising, alcohol advertising, advertising aimed at children, hate speech, and general good advertising practices, should therefore not apply to these American actors. This is clearly nonsense. The same rules should apply to all players in the media market, and the costs of regulation are a normal cost in business operations. All private companies must show accountability and be part of the societies in which we operate. Avoiding responsibility and reasonable regulations will ultimately lead to a public backlash that could harm the entire media market’s prospects. 

Lastly, it can be stated that the advertising tax of 7.65 percent on analog outdoor and direct mail advertising is a pure penalty tax. It lacks all legitimacy. No other country has this type of distorted turnover tax aimed at two smaller advertising categories in a brutally competitive media market. It should be added that the ongoing discussion within the EU to impose a European form of turnover tax on Google and Facebook is just as fundamentally incorrect as the Swedish advertising tax. States should not tax turnover but corporate profits. Anything else stifles competition, innovation, and growth in private enterprise. 

The Swedish media market needs a level playing field. The same conditions must apply to all actors. It’s time for Swedish politics to act on three points: 

Ensure that reporting of revenue, costs, and corporate profits occurs in the market where a media company actually generates its income. 

Apply the same responsibilities and rules for advertising to all companies purchasing ad space in a market—regardless of the media platform. 

Abolish the Swedish advertising tax and prevent the implementation of equivalent dysfunctional penalty taxes at the EU level. 

Magnus Heljeberg
CEO JCDecaux Sweden 

The article was published in Swedish on resume.se 2018-06-07