The API rating agency

How to stabilize the API economy? With trust. Here I am trying to find a rating model that helps developers manage risk and opportunities in using APIs. Every critical point of view is welcome, this is a tool for us, let's build it together. Mehdi Medjaoui, from Webshell.io
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On the API rating agency blog, I said many times that the programmable web is behaving like the brick-and-mortar business, where APIs are like companies and where we have to make webservices supply chain management as we make industrial supply chain management, and inter-webservices connections like inter-industries business.

I wanted to share with you an interesting case about how, Today the 18th of January, French Government (following my old comparison between how webservices works and how goods are distributed), wants to adapt the traditional intercompany VAT system to inter-webservices Numerical VAT system.

TL;DR : If you give back the data you collect to others,  via an API, no taxes for your company. If you keep it for your own purpose for any reason, taxes.image

How does the classical Value Added Tax system work?

France is the country which has invented in 1954 the Value Added Tax (V.A.T.) which is now the most widespread tax in the world.

The idea behind this tax is that only the final user, the end user, who doesn’t add value to the product, is the payer. So, as soon as you add value to a material or a product, you can sell it without taxes to a 3rd party.

Guess you are a company and you buy a product, you have to  pay the VAT in advance, but if you add value to it you’ll sell it with VAT too. Then, the government will give you back the VAT you paid, and collect the VAT on your customer. This is mainly the case between inter companies sales.

But if you don’t add any value to a product and you use it as the end user (often BtoC), then you will have to pay the whole VAT from all the companies which have transformed the product.

The spirit of this tax is that If you make it better and give it back to others, no taxes. If you want to benefit from the product for your own purpose, taxes.

French government asked two tax law specialists about how to avoid that Google, Facebook, Apple , Amazon, Ebay and even Industrials companies etc…skip taxes with the traditional system, in USA, UK, and France)
The report was publicly annouced today.

The French Prime Minister asked in Novemebr a study to 2 specialists, Colin and Collin, for proposing solutions about

- collecting value from webcompanies which are avoiding taxes and

- make a better web

Their conclusions : a Numerical TVA for company which doesn’t free/open their data.

Apply VAT to numerical content

The study is long, (and in french) but to put in a nutshell, it plans to tax companies which don’t open the data they collect, and the main recommendation is to enable then open APIs. You can access the whole study here.

The main idea is that the most a company open the data they have collected on customers or users, the less they are taxed. And not only Google, Facebook or others, all industries are in : Banks, Energy, Food, Cars manufacturers etc…
The user would have access to all his data at anytime, following movement of the customer empowerment like the “smart disclosure in Us” or the MiData in UK”

You can see as a Connect-ification of the web (i.e Facebook connect , Twitter connect, Github connect) where each company will have to give back all the data they have to the user and would have the possibility to bring them with them in each application.
Let’s go for a MyBank connect, MyEnergyProvider connect, MyCity connect etc…you will be able to allow any 3rd-party service to access the level of data you want to share in order to benefit from the User Experience of each application.
It’s the spirit, today, of the Scope of APIs when you are a developer and you ask yous users permissions to fully access to your application.

What would be future applications?

After the “Quantified Self” with Fitbit API for the data I produce every day. For example, we may have a “Quantified Me” with all the Data I produce in the Real Life Economy with my financial, banking, environmental, commercial data.

Don’t fool ourselves. The first goal of this tax is to collect money.
But maybe in a smarter way than just “pay because you make money”  but more “pay because you don’t give back and share data you’ve earned for free”. The philosophy is that the end-user is the data and the content creator.
The aim here is to free/open innovation and web services on the web where the data owner will have the right to bring it with him to any 3rd party application.
These Open APIs will respect neutrality because everybody will have access to his own data from company which want to avoid taxes, following my proposition of API neutrality and following the Net neutrality.
If a company like Twitter want to avoid taxes, they won’t be able to choose which one they accept to share data with. Everybody, or nobody, so it’s Neutral.

French Government sees it also as a solution to solve the Big Data issue by decentralizing data exchange, in a distributed network each data owner has to redistribute himself the data he wants to the 3rd party he chooses.
According to IBM “Every day, we create 2.5 quintillion bytes of data — so much that 90% of the data in the world today has been created in the last two years alone”

The solution would be probably a graph database scheme applied to personal data, but can Government and tax law incentives can really make it happen?

Lot of questions pops up about how to follow and check all the data that are shared and how to collect taxes on bits, that are not in application yet.
More to come with the debate that just begins in France and will be for sure continued in UK and US which have already these questions about how to fairly tax Giants of Internet.