John Whelan: Ireland has to navigate EU 'level playing' digital plans

Mon, 05 Apr, 2021 - 17:03

The Covid-19 crisis has led to a revolution in the way people work, socialise and buy goods and services through digital platforms -- much to the benefit of the US giants.

From an Irish perspective, with many of the US Bg Tech companies locating their European bases here, there is much to gain if the State can expand its digital skills and digital technology after Covid.

Focusing on digital can directly help companies to create new products and services and create new jobs in all areas, including in tourism and hospitality which have been the hardest hit by the pandemic.

However, the EU sees the successful emergence of Europe from the devastation of the pandemic as being a collective effort.

It has a vision that by 2030 Europe should have a data sharing protocol in place to enable a fully functioning digital single market.

This would include, according to many MEPs, a digital EU-wide business passport, health passport, and qualification and skills passport.

In December, the European Commission proposed the Digital Services Act and the Digital Markets Act, both have the aim to regulate digital platforms and championed by executive vice-president Margrethe Vestager.

But the concern of some experts, and particularly in Ireland, is that the proposed acts will not strike the right balance between the need to incentivise Irish and other European small firms and preserving access to choose services delivered by the American Big Tech firms.

These landmark proposals come as Silicon Valley faces increasing global scrutiny which could shake up the way Big Tech does business.

The world’s biggest firms could face mammoth fines or outright bans from the European market.

Then there is also the concern that the European acts will create a fortress Europe syndrome.

For Ireland, digital innovation must come with openness, as in all our trading relationships.

This is particularly so in our dealings with the US and China.

However, rightly handled, the digital services and markets acts can ensure fairer competition for small businesses, as they push for growth in European markets.

The latest EU move, however, is cause for worry.

Under the guise of leveling the playing field for small businesses, EU member states in March adopted new rules to improve administrative cooperation in taxation, making digital platform operators report their sales income in each member state.

The US government sees this as the thin edge of the wedge to taxing their Big Tech companies trading across Europe.

Surprisingly, not all US companies think the same on the issue: Airbnb, the US tourist accommodation digital platform with its European head office in Ireland said it will cooperate with any such new tax reporting rules.

The new reporting rules, despite the Irish government’s objections, will come into force from 2023.

The firms that would be subject to the regulation are US blockbusters Facebook, Google, Amazon, Apple, and Microsoft, as well as China’s Alibaba and ByteDance, and South Korea’s Samsung.

The revision could lead to a situation where member states such as Ireland may end up losing tax revenue, while other countries in the EU may gain tax revenue.

The EU however, maintains that the current situation creates an unfair advantage for digital platforms, which sell a wide range of goods and services without paying tax, compared to the shops and other commercial business on the ground in each country.