Why Europe is bring­ing dig­i­tal com­pa­nies down to earth

Khaleej Times - - OPINION - Jon Van Housen & Mariella radaelli EUROSCOPE Jon Van Housen and Mariella Radaelli are ed­i­tors at the Lu­mi­nos­ity Italia news agency in Mi­lan

It is cer­tainly a bat­tle of ti­tans. The Euro­pean Union, the world’s largest trad­ing bloc, con­tin­ues to ques­tion, op­pose and fine busi­ness prac­tices by global tech com­pa­nies that are so dom­i­nant sev­eral could be called mo­nop­o­lies.

The lat­est bat­tle line is with Ama­zon, the US-based e-com­merce be­he­moth. Last week the for­eign min­is­ters of France, Ger­many, Italy and Spain put for­ward a plan to raise the tax on Ama­zon. Nearly a third of EU states back a plan to tax dig­i­tal multi­na­tion­als that was dis­cussed dur­ing a meet­ing of euro zone and EU fi­nance min­is­ters in Tallinn, the Es­to­nian cap­i­tal.

On a con­ti­nent where re­tail sales and ser­vices are sub­ject to VAT taxes rang­ing from 20 to 25 per cent, EU law­maker Paul Tang es­ti­mates that Google paid at most 0.8 per cent on its EU rev­enues be­tween 2013 and 2015. Lost taxes from Face­book and Google to­tal €5.1 bil­lion over the three years.

“Chal­lenges pre­sented by the dig­i­tal econ­omy are not ad­dressed in the cur­rent tax sys­tem,” says Tang. “It is time for a mod­ern sys­tem so tech gi­ants like Google, Ap­ple, Face­book and Ama­zon pay their fair share.”

Face­book, which like Google is based in Ire­land where it en­joys a low tax rate, re­port­edly paid as lit­tle as 0.1 per cent in the same pe­riod, while Lux­em­bourg-based Ama­zon paid al­most noth­ing as it re­ported nearly no prof­its.

As a re­sult, EU fi­nance min­is­ters want an “equal­i­sa­tion tax” based on rev­enues rather than prof­its. Euro­pean oper­a­tions for Ap­ple, Face­book and Google are head­quar­tered in low-tax Ire­land, which fiercely re­sists pres­sure for higher rates be­cause the pol­icy has cre­ated a boom in well-paid tech jobs.

The EU min­is­ters meet­ing in Tallinn came just as Google ap­pealed a record €2.42 bil­lion fine levied by the Euro­pean Com­mis­sion in June. In its de­ci­sion, the com­mis­sion said Google “abused its mar­ket dom­i­nance as a search en­gine by giv­ing an il­le­gal ad­van­tage to an­other Google prod­uct, its com­par­i­son shop­ping ser­vice”.

The EU be­gan its in­ves­ti­ga­tion of Google all the way back in 2010 af­ter Bri­tish price com­par­i­son site Foun­dem, French le­gal search en­gine eJus­tice. fr, and Mi­crosoft-owned Ciao from Bing com­plained that Google’s prac­tices put com­peti­tors at a dis­ad­van­tage.

The com­mis­sion an­a­lysed the re­sults of 1.7 bil­lion real Google search queries and con­cluded that, on av­er­age, the com­pany placed re­sults from com­pet­ing online shop­ping ser­vices only on the fourth page of its re­sults.

Also in play is the im­pact on tax-pay­ing brick-and-mor­tar busi­nesses that cre­ate jobs for a range of skills, not only for just the tech savvy. “We must oblige In­ter­net gi­ants to pay taxes in each coun­try — it not just a mat­ter of jus­tice and a way to pro­tect com­pet­ing com­pa­nies, but also to lower the tax bur­den on cit­i­zens,” says Ital­ian politi­cian Francesco Boc­cia, chair­man of the bud­get com­mit­tee in the lower house.

“Ev­ery­thing is now a dig­i­tal econ­omy. The value chain of pro­duc­tion has been rev­o­lu­tionised by the web,” says Boc­cia. “Take Airbnb for ex­am­ple: With only 3,000 em­ploy­ees it al­ready has a value of $30 bil­lion com­pared to Mar­riott Ho­tels, which has 4,000 tra­di­tional ho­tels, hun­dreds of thou­sands of em­ploy­ees and a worth $16 to $18 bil­lion,” says Moc­cia. “Pol­i­tics must im­pose rules, oth­er­wise we al­ready know who wins and who loses. It is a dis­ad­van­tage to com­pa­nies and em­ploy­ees, to cit­i­zens, that pay taxes com­pet­ing against those who do not.”

It is part a con­tin­u­ing saga as the EU at­tempts to crack down on US-based technology com­pa­nies. France fined Face­book €150,000 for pri­vacy vi­o­la­tions, and sev­eral other EU coun­tries are in­ves­ti­gat­ing the com­pany’s pri­vacy prac­tices. Last year the EU’s or­dered Ap­ple to pay €13 bil­lion plus in­ter­est in back taxes, say­ing that Ire­land had given the com­pany pref­er­en­tial tax treat­ment. The “right to be for­got­ten” EU reg­u­la­tion now re­quires Google and other com­pa­nies to purge in­ac­cu­rate or out­dated per­sonal in­for­ma­tion from their search re­sults. Sites in Europe have long car­ried EU-man­dated warn­ings to con­sumers that cook­ies are used to track online habits.

US Fed­eral Trade Com­mis­sion staffers ac­tu­ally rec­om­mended a law­suit against Google over un­fair busi­ness prac­tices back in 2012, ac­cord­ing to doc­u­ments ac­quired by The Wall Street Jour­nal in 2015. It de­cided not to pur­sue a law­suit af­ter Google made a few changes.

But in the coun­try that gave rise to the in­ter­net rev­o­lu­tion, EU sanc­tions are of­ten seen as ha­rass­ment and them­selves un­fair.

While in of­fice Pres­i­dent Barack Obama called the EU’s ac­tions pro­tec­tion­ism. “(Amer­i­cans) have owned the in­ter­net. Our com­pa­nies have cre­ated it, ex­panded it, per­fected it,” Obama said in an in­ter­view with Re­code in 2015. “And of­ten­times what is por­trayed as high-minded po­si­tions on is­sues some­times is just de­signed to carve out some com­mer­cial in­ter­ests.”

As the dig­i­tal rev­o­lu­tion changes our lives, busi­ness gu­rus have coined a term for what is de­sir­able: In a world of star­tups pop­u­lated by so-called in­vest­ment an­gels and uni­corns, the value of “dis­rup­tive in­no­va­tion” is supreme.

But many in Europe and across the globe need non-tech jobs, not an­other app. In­deed it is time to bring the dig­i­tal world down to earth.

As the dig­i­tal rev­o­lu­tion changes our lives, busi­ness gu­rus have coined a term for what is de­sir­able: In a world of star­tups pop­u­lated by so-called in­vest­ment an­gels and uni­corns, the value of “dis­rup­tive in­no­va­tion” is supreme.

Newspapers in English

Newspapers from UAE

© PressReader. All rights reserved.