Have governments finally figured out how to close tech and tax loopholes?
- Reeta Dhar
- 2 days ago
- 15 min read
Updated: 1 day ago
A glimmer of light in the sordid pit of politics
It happened with social media.
It is happening with capital gains.
It may happen with AI.
Governments around the world are adopting the 'fast follower' strategy to close regulatory loopholes around technology and taxation: Once one government figures out the right policy setting to achieve a given outcome, others don't waste any time to follow.
This is the fastest governments have moved to develop and legislate uniform laws across multiple jurisdictions. For those of us looking for the 'light' in the world of politics, this may be it.
The case for uniform laws
There are many pieces of legislation that would benefit immensely from international cooperation–where many, if not all, governments agree to impose largely uniform laws for a given objective.
Having a uniform set of laws across countries help to remove incentives for individuals and corporations to shift income, assets, profits, business operations and even their place of residency, to avoid complying with a law they deem unfavourable. Typical examples include billionaires shifting revenues and profits to tax havens or multi-nationals choosing to operate in markets that have lax regulation for their products or services.
Uniform laws also help to ensure that challenges that are common to all countries, and that can only be resolved through cooperation, are effectively dealt with.
International treaties take too long and are easily undone
The traditional way to develop uniform legislation was through developing legally binding international treaties:
Diplomats and policy experts would work behind-the-scenes through endless complexities and conflicting agendas to prepare the terms of treaty.
This would be followed by annual conferences where decision makers would meet to discuss, debate and negotiate the terms.
The whole process could take many years to conclude and the terms agreed would often be watered down to the point of being ineffective. It also gives special interest groups and lobbyists plenty of opportunity to insert loopholes and rules that serve their interests, which become difficult to unwind later.
Countries can also play politics with the process, refusing to sign onto agreements or indeed, choosing to exit a few years on. Depending on how pivotal their country is, this can put all the effort to waste.
The debacle with climate change is a case-in-point.
The climate change debacle
Unless you have been stranded in an alternate universe, you have no doubt heard of the annual climate change conference or COP (Conference of Parties) as they are more popularly known. Coordinated by the United Nations, the first COP was held in 1995. It was designed to be a decision-making forum where international governments could gather annually to negotiate and legally commit to policies for combating climate change.
After three decades and 30 COPs, I think it is fair to say the process has largely been a failure: Not only has the world failed to take meaningful action to combat climate change, global warming has accelerated over this timeframe.
This is hardly surprising when you consider that fossil fuel lobbyists frequently outnumber delegates from countries most at risk from climate change at the COPs–1,773 fossil fuel lobbyists were reported to have attended COP29!
The Paris Agreement reached in 2015 provided a brief glimmer of hope but on closer scrutiny, it was obvious to anyone acquainted with climate science that the goal of limiting the rise in global temperatures to 'well below 2°C above pre-industrial levels, while actively pursuing efforts to limit the increase to 1.5°C' was not going to amount to much.
Ten years on, even this 'soft target' is quickly getting out of reach.
The Paris Agreement was also struck with much fanfare under the leadership of Obama. Trump ran on the promise of rescinding it if returned to Office; a promise he wasted no time in keeping. Even though 190+ countries remain as signatories, the withdrawal of the second largest emitter is problematic. It is also unclear how many of the 190 signatories are meeting their obligations under the treaty.
Governments are now beginning to move unilaterally in their own interest
Trump also heralded in an era where niceties, norms and alliances have given way to pursuit of one's own interest. All Western governments have woken up to the fact that they cannot rely on old allies anymore but have to stand on their own two feet.
The upside to all this is that countries are now more willing to act on unilaterally to protect their national interest and address entrenched societal issues.
Some are boldly stepping up to be the first to legislate consequential public policy even if it deviates from global norms and comes with political risk.
Others are adopting the more opportunistic stance of a fast follower; wasting no time to copy a well-crafted public policy that landed well.
This approach is helping to not only close pervasive gaps in regulation around technology and taxation, but also ensure that the laws being implemented are largely uniform.
Trump has inadvertently pushed the international community to find a more nimble and effective way to arrive at international consensus, and implement uniform set of laws that are closing the loopholes that American tech and multinational companies have long exploited.
All it takes to get the ball rolling is one political leader, in one government, to make the first move–and it seems that the Australian government has finally found their spine and are stepping up to play that role.
Australia is fertile ground for difficult reform
Australia is a unique place. It has an educated and skilled, harmonious, multi-cultural society, where the vast majority of people enjoy a good standard of living.
But it’s the Australian culture that makes it stand out the most: Built on a firm foundation of egalitarian values, Aussies of all ilk have little tolerance for class–we do not pander to the rich and famous.
'Tall poppy syndrome' is the phrase that is oft used to describe the Aussie attitude, especially towards 'successful' people. Whilst some are critical of this prevailing attitude, calling it the 'politics of envy', one could make the case that it is in fact a reflection of the collective wisdom of the populace:
Australians instinctively know that regardless of the myths of the 'self-made' man or 'meritocracy', success more often than not comes down to dumb luck.
'Success' is also always built on the hard work, sacrifice and contribution of many unseen folks, and benefits greatly from public services and infrastructure like a good public education system, healthcare, roads, bridges, etc.
So when rich people get on their pedestals and start preaching to others how they should live their lives–Aussies very aptly tell them to 'sit down mate.'
Regardless of how much media the rich own or advertising they buy, this cultural attitude has kept their influence largely in-check. It also explains why Murdoch, for example, who is an Aussie export, was able to wreak vastly more havoc in the UK and US–societies where there is a greater tendency to idolise wealth, class, power and fame.
Another upside to this uniquely Australian culture is that it gives the government of the day plenty of 'dry powder' to move on difficult reform: When rolling out contentious reform, Governments anticipate coordinated backlash from special interest groups and corporate media, but they also rest easy knowing that the vast majority of Aussies will see through the BS.
This is exactly what the Albanese government has been counting on, as they begin to tackle regulatory black holes that have long persisted around tech and taxation.
First up: Social Media Ban
The first act of the Albanese government was to ban social media for children under 16. The ban came into force on 10 December 2025.
This was a masterclass on legislating a law that in practice will be very difficult to enforce. How did they solve for it?
They passed the onus of enforcement onto the social media platforms themselves, who are the ones that get fined for non-compliance.
Think about it, every time a teen boasts that they managed to sign up to Instagram, it is not something people can criticise the government for–rather, it is a data point the eSafety officer can use to issue a 'Please Explain' to Facebook. Check mate.
The Albanese government has also recently doubled the fine for non-compliance from $49.5 million to $99 million because the tech bros were found to be dragging their feet with regard to enforcement.
The legislation was initially panned by many as being controversial and impacting freedoms of young people. A few months on, it seems like the least the government could do.
In fact, it beggars belief that it took government 20 years to regulate social media, when there have been plenty of warning signs that these platforms were impacting the mental health and wellbeing of children and adults alike, manipulating people's political persuasions, spreading hate and disinformation, interfering with free and fair elections, and driving conflicts, killings and suicides right around the world!
What is worse is that the CEOs and Executives of these platforms knew the adverse impact their product was having, but instead of investing in product safety, they invested in PR and lobbying …
It is no surprise therefore that as soon as Australia developed a decent piece of legislation to regulate social media platforms, all other countries lined up to follow.
Today over 40 countries are currently considering or drafting youth social media limits, with several high-profile nations moving toward active timelines, including the UK, France, Turkey, Greece, Canada, Denmark, Norway, Spain, Sweden, Austria, Slovenia and the African Union!
The only thing that will top this would be to see Zuckerberg serving life in prison for the harm he allowed his product to cause (see footnote for the list).
Then came capital gains
More recently, the Albanese government tackled another hairy issue: Capital Gains.
Since the 2000 tax reform brought by the Howard Coalition Government, owners of capital (who are usually affluent) in Australia have benefitted from a 50% discount on all capital gains they made on their investments. This has meant that the tax they paid relative to their income was lower than the effective tax rate paid by people who work for a wage (and have no capital beyond their wage to invest with).
To put it simply, the reform created an inherently unequal taxation system that gave higher tax breaks to the relatively richer segments of the population–people with capital, houses and other assets.
The original intent of the reform was to encourage wealthy people to invest their capital in productive enterprises e.g. stocks and new businesses. However, when combined with the 'negative gearing' tax break from yesteryears, the most attractive place to invest became residential property and especially, existing homes.
Anyone with savings could now take out a loan to buy a house, put it out to rent, offset the losses from renting the property in the early years against their ordinary income and lower their overall tax bill. When they finally decided to sell this property, they could then claim 50% discount on the capital gains.
It was the ultimate financial strategy to minimise tax and get on the wealth creation ladder. Predictably, this strategy was adopted en masse by many working Australians and amplified by professional investors who began to amass large property portfolios.
It drove massive inflows of capital into residential property which, against a backdrop of population growth and slow increase in housing stock, drove house prices to the point it exceeded increase in wages.
Housing went from being a basic need and human right to becoming a bonafide investable asset class–producing one of the highest yields (returns) over the last 25 years, attracting even more investment …
While many homeowners also benefited handsomely from the increase in their house values, it made houses unaffordable for younger generations: It was getting to the point that without the help of mum and dad, children were finding it difficult to enter the housing market.
The changing value of dwelling value-to-income ratio, which measures the median household income required to buy a median priced dwelling, is illustrative:
1970s–1980s: Approximately 2.0x to 3.0x annual household income.
Early 2000s: Rose to around 4.0x to 4.5x.
Today: The national average sits around 7.5x to 8.0x. In Sydney, this ratio exceeds 9.5x to 13x+ depending on whether all dwellings or detached houses are measured.
This vicious cycle would have continued had the government not intervened to change the tax laws, removing both the capital gains discount (replacing it with a system of indexation for inflation) and limiting negative gearing (to investment in new homes only).
As important as this policy change is for improving housing affordability, it was also political suicide – no homeowner wanted to risk their homes coming down in value, even if it meant that it would make homes more affordable for their children and grandchildren …
Some conveniently chose to buy into the right wing propaganda that the rising house prices were all due to immigration, which drove up the popularity of fringe parties like One Nation.
There is no doubt that high immigration against the backdrop of low growth in housing stock played a part–but the structural shift that saw massive amounts of capital flow into residential property, driving up the prices beyond wage growth, was coming from the incentives created by the tax policy.
The other problem this was creating was that it was taking capital away from productive investments like starting or investing in businesses, which are inherently more risky investments than housing, but key for economic growth.
Governments had to act but were understandably reluctant to table it as a marquee policy during elections. The Albanese government even said on the record that will not be touching capital gains nor negative gearing to defuse the issue during the election.
But with the growing issue of housing affordability, and shifting demographics (younger millennials and gen zs are overtaking boomers and gen xers as a voting block), the government had to act in the public interest–in spite of the public.
It was to be the policy where they would spend their political capital.
The Albanese government did not stop at CGT reform on property investments either: The the 50% discount on capital gains was abolished across all investment types beyond property, including stocks, businesses and other productive assets.
The Labor Government they took the opportunity to address the broader issue of inequality the CGT tax breaks had created.
This caused much consternation in the business community, especially amongst technology startups who felt that the work they do to start new businesses with high risk/reward business models has more merit than the work done by the rest of society, and they therefore should not be obligated to pay the same tax rate as the average salary-earning pleb ...
Unlike normal small businesses, many founders in the startup world build businesses with a goal to exit to larger competitor within the decade–so the increase in capital gains tax stung especially hard.
Many threatened to leave and take their 'amazing' businesses with them. Advocates for the sector also claimed that this would discourage people from starting businesses in Australia in the first place.
Only a few enlightened voices in the tech world called the hyperbole for what it was–hot air.
Having worked directly with startup businesses for over three years, I can confirm that no founder ever told me that they started their business or were choosing to stay in the country on account of Australia's capital gains tax. The reason many startups choose to leave Australia to scale their companies in the US is due to access to capital and a market that is at least 10 time the size of Australia. It has little to do with capital gains tax.
The reality is that capital gains only get realised on the sale of the business, and achieving a successful exit in the startup space is incredibly rare–the lucky few who will realise a capital gain will be more than able to afford to pay the tax.
No doubt aware of this dynamic, the government made some provisions for small business owners but not a whole lot in this regard, with the tax law now operating in such a way that owners of capital (regardless of airs and graces they give themselves) are now paying roughly the same level as salaried workers who pay PAYG.
It was a win for equality and a win for housing affordability–and thus far, the sky has not fallen in.
A similar issue exists in many other parts of the world where there is either no capital gains tax or lower capital gains tax relative to what wage earners pay. The net effect is that nurses, teachers and cleaners end up paying a relative higher rate of tax than billionaires who just offloaded their 5th home in Aspen.
Calls to introduce or increase capital gains tax is gaining momentum around the world. Governments worldwide are no doubt keeping a close eye on Australia.
Artificial Intelligence (AI) is next on the agenda
Now the Albanese government has their eyes set on the hairiest of all issues: Regulating AI
Regulation of AI is something that the Trump administration, who have been co-opted by tech billionaires, have not only avoided but actively blocked the States from undertaking as well.
It was encouraging therefore to see Prime Minister Albanese tackle this hairy issue in a recent speech, even if his talking points were limited to the use of our energy, water and intellectual property by data centre operators and their AI customers–without any clear indication of what the law will be or the consequence of non compliance.
More detail is set to follow in the months ahead and one can only hope that Australia does not repeat the mistakes that it made during the 'mining boom'–where to attract short term construction jobs, we effectively gave our natural resources away to global mining and gas giants for free…
The focus on data centres in particular was problematic: Data Centres are not some amazing infrastructure that will secure our AI future …
Data centres hardly create any jobs and will probably be sold off to large PE firms within the decade. At that point we not only lose ownership and tax revenue, but also oversight of these giant computers. We will have no idea what the compute is actually being used for–deep fake pornography, grooming children, perpetuating false news, misinformation, disinformation, manipulating markets, …
Problematically, a recent leak also suggested that the government is considering watering down the licensing scheme for copyright content to make way for the data centres to be used for 'training AI models' using copyright content. Whilst the government has denied that this is the path they will take, it appears to be an option they have at least considered.
Time will tell how this legislation shapes up, but this is a space where a government, any government really needs to step up and set the right tone–and not just with Data Centres either.
They need to consider the long term challenges that a truly intelligent AI system poses on society:
How can we ensure that systems that demonstrate general intelligence act in the best interest of humans and rest of society?
Is it OK for a handful of enterprises to profit from the collective human knowledge?
How can we ensure that access to human knowledge is free for all and not only to those who can afford to pay a subscription?
How can we check the power of the handful of American enterprises whose leaders don't shy away to coopting with corrupt regimes?
How will we provide for the population when a generally intelligent system replaces their labour?
Hardly a lone wolf
The good news is that Australia does not need to come up with all the answers. Every other government is working through the same set of issues as they seek to not only understand but also reign in AI. All they have to be willing to do is to waste no time to copy sensible reform being made elsewhere in the world.
Like Australia, governments internationally are also having a hard look at the other prescient issue of our time: Growing inequality. One of the sticking points of the debate here as been on the compounding wealth of the ultra-rich (billionaire class) in the society and the relatively little tax that they contribute.
Billionaires have been able to getting away with preferential tax treatment for far too long. As the extent of their influence on politics and markets has become apparent, the public and politicians with a moral compass have grown weary. The public sentiment to put a check on their wealth and influence has never been higher.
There are currently two different versions of a 'billionaire wealth tax' currently going through the halls of the French and Californian parliaments that seeks to redress this issue. Both propose taxing a proportion of the total assets held by the billionaires as a means of bringing their effective tax rate back in line with that of the average tax payer. They are structured differently to reflect the different demographics, political realities and jurisdictions that these states are dealing to e.g the French version calls for an ongoing annual tax executed at the Federal level whilst California is calling for a one-off tax to address the historical inequalities whilst managing the risk of 'exodus'.
These pieces of legislation have generated enormous public interest and there is no doubt that governments around the world are keeping a close eye on its progress.
If passed, they will no doubt become a catalyst for tax reform around the world because it speaks to what sits at the heart of democratic systems of governance: equality before the law.
A glimmer of light in the sordid pit of politics
Governments becoming emboldened to lead and if not copy sensible reform is a welcome change in the state of politics in our highly globalised world.
Politicians taking on huge political risk of tackling the entrenched societal issues can rest assured that they won't be walking alone for too long–governments around the world are waiting in the wings, ready to be a fast follower.
The governments that fail to follow through on sensible reforms being made elsewhere will increasingly be the outlier–It is they who will now be taking on the political risk.
Footnote:
For those who may not be familiar, a preliminary search on the internet for the query, 'How many deaths have been credibly tied to Facebook since they began operations' returns a rather shocking account:
The Rohingya Genocide in Myanmar: A United Nations investigation and reports by organisations like Amnesty International concluded that Facebook's algorithms actively amplified military-backed hate speech and misinformation in 2017. This ethnic conflict resulted in the deaths of more than 25,000 Rohingya Muslims and the displacement of over 700,000 people. Meta later acknowledged it did not do enough to prevent its platform from inciting offline violence. [1, 2]
Ethiopia's Tigray Conflict: Human rights groups and a multi-billion dollar lawsuit filed in Kenya allege that Facebook’s algorithm promoted viral, hateful, and violent content that directly fuelled ethnic violence during the civil war, contributing to targeted killings. [1]
Adolescent Mental Health & Suicide: Prominent social scientists—such as Dr. Jean Twenge and Dr. Jonathan Haidt—have documented a sharp rise in adolescent depression, self-harm, and suicide rates beginning around 2012, which correlates with the widespread adoption of smartphones and image-heavy platforms. [1,2]
Individual Litigation: Hundreds of families have organized via advocacy groups to file wrongful death lawsuits against Meta. These suits argue that the platform's addictive design and inadequate protection features directly contributed to fatal cases of severe cyberbullying, sextortion, and deep depression. [1,2]
Lethal Online Trends: While extreme 'viral challenges' (like the blackout challenge) are more heavily documented on platforms like TikTok, various dangerous stunts have historically circulated through Facebook and Instagram, resulting in accidental suffocation or trauma deaths among children. [1]
Counterfeit Fentanyl Sales: Meta platforms, along with Snapchat, have faced extensive legal and congressional scrutiny regarding drug dealers using the apps to sell illicit pills. Hundreds of accidental youth overdose deaths have been traced back to transactions initiated via social media messaging. [1]
I repeat, Zuckerberg should be serving life in prison.
Live Broadcast Coming Soon.
Subscribe to be notified of the date and time.
There will be a Q&A session afterwards.
Written by Reeta Dhar. Cover Art by Darren Pryce.
Written and illustrated at the historic Lanificio Cazzola in Schio, Italy
First published by Vitalis in September 2026
Comments