Estonians look to push Europe into being a real digital leader

Europe Letter: Tallinn digital summit to be attended by all but one of EU’s heads of state

'What the Estonians would like is for the leaders to back what will undoubtedly be called the ‘Tallinn Agenda'.' Photograph: Toby Melville/Reuters

'What the Estonians would like is for the leaders to back what will undoubtedly be called the ‘Tallinn Agenda'.' Photograph: Toby Melville/Reuters

 

Estonia does digital big time. And in an astute piece of national branding, it has used its EU presidency to promote its leadership in the field – particularly in e-government dealings with citizens – to host a special EU “digital summit” on Friday here in Tallinn which will be attended by all but one of the union’s heads of state (No, Ms May will indeed be here).

The hope, the presidency says, is to provide “a platform for launching high-level discussions on plans for digital innovation enabling Europe to stay ahead of the technological curve and be a digital lead in the global world in the years to come”.

What the Estonians would like is for the leaders to back what will undoubtedly be called the “Tallinn Agenda”, a roadmap for Europe to embrace and lead the digital revolution, to give it a new competitive edge.

By 2020, there will be nearly 4.1 billion internet users worldwide and 26.3 billion networked devices. Digital technologies are expected to add $1.36 trillion to the global economy by 2020.

Economic impact

It is estimated that the combined economic impact in Europe alone of the automation of knowledge work, robots and vehicles will reach between €6.5 trillion and €12 trillion annually by 2025, including gains in productivity and benefits in areas such as healthcare or security.

But where does Europe stand, the Estonians ask?

Today, seven of the top global 20 companies by market capitalisation are tech companies: five American, two Chinese. None is European.

Europe’s Digital Progress Report for 2017 records that merely a fifth of companies in the EU could be considered highly digitalised. Already, 90 per cent of all jobs require at least a minimum level of digital skills, yet 100 million Europeans have yet to use the internet; 45 per cent of the EU population have insufficient digital skills; 42 per cent of those with no digital skills are unemployed; and 40 per cent of European employers report that they cannot find people with the right skills.

As for e-government, reports suggest that digitisation could cut the administrative burden of the public sector by 15 to 20 per cent.

A new paper covering corporate taxation of the digital sector will make uncomfortable reading for Leo Varadkar

The Estonian emphasis in its preparatory work has been on the opportunities – to upskilling the entire Continent, to a commitment to 5G infrastructure, to research, to assisting SMEs’ access to technology (less than 20 per of SMEs currently use the internet as a sales channel), to removing barriers within the single market (such as national rules confining data storage to within member states).

For other member states, the challenges are also about how governments harness the digital society to serve not only big business, but society. Not least by making them pay taxes.

Corporate taxation

A paper from France, Germany, Spain and Italy on Deliverables for the Digital Summit in Tallinn puts the issue firmly on the agenda. It opens with a strong declaration on corporate taxation of the digital sector, which will make uncomfortable reading for Leo Varadkar: “First, we must establish a framework that ensures a level playing field for all potential players in the EU’s digitalised economy and markets.

“Ensuring that markets operate in a fair and competitive way is instrumental to encourage innovation, foster business development and guarantee consumer satisfaction. The key is to ensure that all similar economic activities are subject to similar rules. This concerns both tax policy and the regulatory environment.”

The paper insists that tax should be paid on value added where it is added, not where a company is registered. Estonia has been pressing for the idea of a system of recognising “virtual establishment” of companies even where they have no physical presence, and the four urge the leaders to seriously consider a French proposal for a “digital equalisation levy” on turnover rather than profits.

Varadkar will again, no doubt, explain that Ireland is in favour of OECD proposals to end tax base erosion and wants to wait for it to bring forward proposals in the spring on the taxation of digital companies. He will not be willing to move one iota on Ireland’s defence of unanimity voting on taxation.

Taxation apart, increasing attempts by states and the EU to set parameters for the activities of the giant tech companies is, curiously, not part of the agenda.

Substantial rulings

The EU court has made a number of very substantial rulings, and awards, on competition, state aid and tax grounds against companies such as Google and Apple in what is a significant shifting of the rules of the game.

The German government has introduced legislation requiring social media sites to police their hate-speech, and terrorism-related content, with substantial fines for non-compliance. The social media companies have begun also to admit they are more than passive purveyors of data, and have responsibilities.

And there is, for example, increasing concern across the Continent, to be somewhat parochial, at the threat to viability of the traditional news media from the capture of online advertising by giants such as Facebook.

The digital revolution has not only rewritten the rules of economics but transformed social relations – how we speak and relate to each other – and created new loci of power beyond democratic control. While we seize the opportunities to ride this wave, we must also begin a dialogue about what that means and how we bend technology to meet society’s needs, rather than abandoning ourselves to supposedly uncontrollable forces.

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