• Taxing the digital economy

Digital photos and our obsession with our-selfies

We love taking photos and as our use, distribution, and storage of digital images soars so too do government plans to tax digital images.

Aug 14, 2015

Forty years ago it took Kodak’s Steven Sassoon 46 seconds to record and display the world’s first digital image. Today, on the photo-sharing platform Snapchat 404,616 photos are shared every 46 seconds!

Technological advances and the proliferation of social media has led to an explosion in digital imagery. We take 1.5 million digital photos every 46 seconds across the globe, most are uploaded, shared and stored on the web.

Digital images, their purchase, and their storage is now big business. So too are plans to tax digital images: their use, distribution, and storage.

A brief history of the digital image

When Sassoon did what he did back in 1975, the company he worked for, Kodak had created the first digital camera. His actions gave birth to a photographic revolution.

Here’s a woman taking a selfie in 1900!

Tax digital images

We can’t take enough photos.

Over 1,000,000 selfies are taken everyday. Facebook, Instagram, Snapchat…the list goes on: we are obsessed with ourselves; what we are doing, and where we are doing it. And we now want everyone to know this: it’s why we will upload 1 trillion photographs in 2015.

Facebook users have already uploaded more than 250 billion photos, and are uploading 350 million new photos each day. To put that into perspective, that would mean that each of Facebook’s 1.15 billion users have uploaded an average of 217 photos each.

Instagram, meanwhile, says that 300 million people use its photo app every month, sharing 70 million photos and videos every day: that’s 25.5 billion uploads a year (Source: Instagram blog).

We love selfies, and love looking at other people’s selfies. Remember, Ellen DeGeneres’ Oscar photo? It is the most retweeted photo ever. A social media classic.

If only Bradley’s arm was longer. Best photo ever. #oscars pic.twitter.com/C9U5NOtGap — Ellen DeGeneres (@TheEllenShow) March 3, 2014

And what of the relative newcomers to this scene, Snapchat and WhatsApp?

Well, recent data from Photoworld concludes that Snapchat users upload 8,796 photos every second. That’s 31.6 million photos every hour. WhatsApp users are just pushed into second place in this battle of the newbies as they share 8,102 photos every second, or 29.2 million every hour.

Technological advances

Technological advances are making it easier for you and I to capture and edit photographs.

The majority of today’s digital cameras are in smartphones, of which there are an estimated 2 billion in circulation. This multiplication of smartphone ownership has also led to the creation of a specific photography genre: ‘iPhoneography’. Used to describe images snapped and edited via iPhones and its iOS operating system.

The first phone with a built-in camera was made by Samsung (the SCH-V200) and released in June 2000. The invention was the precursor to ending Kodak’s dominance of the photography market.

The proliferation of broadband and increased mobile network speeds had led to an explosion in the distribution of digital images. If you want a beautiful shot of Times Square;Siam Paragon mall in Bangkok; Gorky Park, Moscow; or Dubai Mall then there are millions of images available online. These locations are among the most-Instagrammed places on earth.

‘Parallel Connection’ by @osgemeos can be seen on #TimesSquare’s electronic billboards throughout the month of August at 11:57p.m. as part of #MidnightMoment. Photo courtesy of Ka-Man Tse for @tsqarts.](https://instagram.com/p/6TlMt8pdQt/)

Big business

Licensing for the use of digital images is now big business.

For example, Getty Images – the U.S.-based stock photo agency – was sold in August 2012 to one of the world’s largest private equity firms, the Carlyle Group, for $3.3 billion.

Bill Gates owns a competitor of Getty Images called Corbis. Gates’ company – which he privately owns – has a collection of more than 100 million images and 800,000 video clips.

As Slate.com once stated: “Any time you see the iconic photos of Marilyn Monroe with her skirt blown up and Einstein sticking his tongue out, he [Bill Gates] gets paid.”

Getty and Corbis along with media behemoths Reuters and the Associated Press control the distribution of the majority of digital images to the press.

New revenue, new rules to tax digital images

As with all new revenues it’s not long before the tax authorities begin to take an interest. Digital images (their download and subsequent storage) are among the digital services in the crosshairs of the European Union and other tax jurisdictions across the globe.

The UK tax authority, HMRC, give the following EU VAT advice on the rule change that came into effect on January 1, 2015. For one the new rules apply to services that are ‘electronically supplied’ and includes things like:

  • the supplies of images or text, such as:photos, screensavers, e-books and other digitised documents e.g. pdf files

The rules apply to business-to-customer (B2C) supplies of these digital services.

For example, if you are located in the EU and are downloading a digital image then the company you are dealing with now needs to tax digital images (in other words apply VAT) based on your location. It’s as simple as that.

The tax on the supply of digital images to EU customers is now applied based on the location of the customer. If a U.S. digital stock photo site is supplying a U.K. customer with an image for download then that U.S. company must charge U.K. VAT and also declare it.

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