With conflict flaring over censorship of Twitter in Turkey around the time of March elections, the Turkish government has reportedly demanded that the company open an office there. Tim Worstall over at PandoDaily writes:
Why not just stick one employee there, as an “office” and make the local government happy? The answer being that having an office in a country changes the tax position completely and the important phrase to understand here for non-accounting types is “permanent establishment.”
Tim rightly points out that taxation of Internet businesses that flow across porous international borders is a thorny subject. The largest, most successful services are understandable targets for tax authorities. Nevertheless, in the case of countries like Turkey, I think the discussion of taxes, while valid, is mostly political theater. The main issue in my opinion is free speech, or rather the desire to manage and squash it.
As a lawyer who’s served in GC and other in-house counsel roles at consumer Internet companies including MySpace and eHarmony, I can tell you why I wouldn’t want an office in Turkey (or certain other countries): Twitter is the middleman for a vast amount of free speech, much of which certain governments will dislike. What do you do when the authorities come knocking with a search warrant to turn over electronic records or grant real-time access to data that will likely lead to them arresting, torturing and/or executing a whistleblower or dissident? You have two choices: Be complicit or refuse. If you refuse, as the person(s) on the ground in Turkey, you face a very real risk of being arrested for contempt of court and thrown in, um, Turkish prison. (And you thought the NSA was bad?!)
This is not a joke. It’s all very well to pontificate about universal values and human rights in a comfy conference room at an EFF symposium, but if your butt is in that chair in that office when foreign government agents saunter in with machine guns, things get real in a hurry. An employee of Twitter or Google or Facebook enjoys no special status: A corporate office is on foreign soil, not an embassy; they aren’t government officials, so diplomatic immunity doesn’t apply. As a business enterprise they aren’t even sheltered by the voluntary restraint most countries (though certainly not all) customarily show with NGOs and journalists.
A company that does business in a foreign country does so on its terms, full stop. The unique, world-changing thing about the Internet is that you can do business with millions of people in a country like Turkey without actually being in Turkey. That circumvents the grip totalitarian governments have on bricks-and-mortar businesses to coerce them into doing just about anything. Without a physical presence there, the worst thing a hostile government can do is try to block access to data networks (e.g., the Great Firewall of China).
I have no inside knowledge of the goings-on at Twitter, so the foregoing is just a theory on my part. I can say that if I were back at eHarmony — or GC at any other Internet company with millions of users — and my CEO wanted to have a chat about opening an office in Turkey (or any totalitarian state without solid free speech protections), this would be how I framed the discussion: Are you willing to have the company serve as a tool of a repressive regime, in deference to local law, regardless of how forcefully we might disagree with it in substance? If not, better to stay outside its borders and continue fighting the long war with electrons.