Australian regulators are having a tough time of it at the moment. The really hard part is they exist in the 21st century. For organisations still living in the early part of the 20th century, that’s hard.
The biggest problem for regulators is the world moves a lot faster than they can handle.
Technology advances at such speed that by the time regulators figure out what to do the game changes.
In today’s world there’s lots of new technology. And it’s their job to figure out how to ensure it applies to the ‘rules’ of Australia.
Here are just a few technologies regulators are trying to wrap their head around at the moment: cryptocurrencies, mobile payments, digital privacy and our case in point today, crowdfunding.
It can be overwhelming for regulators to apply decades-old laws to days-old technologies. It makes me enjoyably wonder what an executive meeting at the ATO or ASIC looks like. I’d suggest when ‘Bitcoin’ or ‘Kickstarter’ pops up in conversation, the reaction would be…
What’s a Regulator to do?
The truth is, regulators are there to regulate. Except it appears Aussie regulators don’t have the expertise, knowledge or understanding to regulate in a modern world.
As I said, technology advances at a rapid pace. I call it The Law of Technological Compounding. In the next decade we’ll see an ever-increasing rate of new technology. Technological compounding is simply one technology converging with another. The result is a new technology once thought to be impossible.
But with things moving so fast, to stay relevant, regulators must be flexible, nimble, and speedy too. The problem is, they’re not.
A basic function of government is to put in place rules for society. We live within these rules. And apparently these rules are supposed to be good for us.
The rules are the laws and regulations we abide by in everyday life. The taxes we pay, the limits we stay within, the bad things we are prevented from doing, are all thanks to rules and regulation.
But what happens when the rules are no longer applicable? What happens when society outgrows the rules of the past? Or more specifically in this case, what happens when old rules can’t change fast enough for new technology?
Well, I can kind of answer that last question. Revolt. When old rules are applied (often unfairly) to new technologies, you get social revolt.
Take the various countries around the world trying to supress technology like Instagram, Facebook and Twitter. These are outlets that allow users to express and discuss their ideas and thoughts. They are the ultimate tools for freedom of speech. But if you try to supress that freedom, you get backlash from users.
And it’s this kind of backlash that’s slowly finding its way into Australian society.
The Australian government seemingly does their best to make our country unattractive to technology business. And it’s because they simply don’t know what to do, so they just apply the same rules they always have, because that’s all they know.
Look, I love Australia. It’s home. It will always be home. And there are some fantastic aspects about Australia. The country is small enough and young enough to become a global technology leader. But for whatever reason, the Aussie government is incapable of establishing a genuine plan for the future.
And they proved this recently with their guidance on crowd funding platforms. You might have heard of Kickstarter. They’re an online platform you can use to raise funding to launch a new project.
You might be trying to launch a new technology, a new book, an art installation or even a small local event. Through Kickstarter, you can get donations from supporters who want to help fund a promising project.
Let’s say I’m writing a book. I don’t need money to actually write it. But I might need $5,000 to print 1,000 copies, get a cover design, and do some marketing to get word out.
I can create a project on Kickstarter to raise the $5,000 I need. In doing so, I can set ‘rewards’ for different levels of donations, a way of saying thanks for the donation. For people who donate $2, there might be an acknowledgement in the back of the book. For $10, there might be an early release manuscript copy. For $100, there might be a copy of the finished book and an invitation to a private book signing. You can set any rewards you like to entice people to donate more.
It’s a fantastic way for entrepreneurs, inventors and creatives to get a project off the ground. And it’s a great way for people to back a project they believe in or want to be a part of.
However, the Australian Tax Office wants to make crowdfunding harder. They want to add a layer of complexity to it. They want Australian start-ups that use crowdfunding to levy GST charges.
If you want to do a Kickstarter project, you might have to then be registered and pay GST. In other words, more red tape, more regulation, more headaches.
In that situation, what would a nimble start-up do? They’d launch their project somewhere that’s not Australia. They’d go where they’re welcomed with open arms.
This move by the ATO would be an unnecessary roadblock to start ups. When you’re trying to get off the ground, the last thing you want is to be hounded by the tax office. If you’re making millions, then sure, pay up your taxes, GST and anything else you owe. But until they make money, we should be trying to encourage innovation, development and success.
You see if we can make it as easy as possible for start-ups to be successful in and stay in Australia, then they will contribute far more to the economy than the pittance of GST collections as an early stage start up.
Sadly, I don’t think much will change with the current regime. We can only hope for a political leader with vision. But in the meantime, all we can do is watch as innovative start-ups and future tech leaders simply walk offshore and find somewhere more accommodating.
What a shame.
Technology Analyst, Revolutionary Tech Investor