Digital Tax: "Europe needs to invest more in digital economy"

Willem Jonker, CEO EIT Digital

Willem Jonker, CEO EIT Digital

Willem Jonker, CEO EIT Digital, says Europe needs to invest more in digital technology

"Europe needs to invest more in the digital economy to fundamentally address platform unbalance." This was the message from Prof. dr Willem Jonker, CEO EIT Digital, speaking on Dutch news programme BNR about the European Commission's proposal to raise taxes from big tech companies. While European people support this initiative, Jonker would rather see more investment in digital technologies.

In March this year, the European Commissioner for taxes Pierre Moscovici proposed a European Digital Service taxation on revenues earned from certain digital business activities like online advertising, online trading and sales of user data. European finance ministers are scheduled to discuss the proposal today.

According to the results of a survey published yesterday, and commissioned by the social democrats in the European Parliament, a large majority (75 percent) of Europeans living in Austria, Denmark, France, Germany, the Netherlands and Sweden support this ‘Digitax' on companies like Facebook, Google and Booking.com.

Jonker agrees it is an issue that needs to be addressed and that it is important that European finance ministers are considering it. He adds that the problem is twofold. "First, tech companies earn a lot of money on data from European citizens that is given away for free. And the big platforms, where you can buy online stuff, are harming traditional retailers because they can operate more cheaply. The EU wants to address this problem. That is good. But I wonder if the proposal for a digital tax solves the problem?"

To Jonker, the tax issues should be resolved on a global level. "I think that the OECD should come up with a new tax system. If Europe introduces the Digitax, then most of the American companies will be affected. You can imagine what will happen if we introduce this tax and America hits back with taxes on other stuff that affects us. The proposal may fuel a trade war."

Jonker has another suggestion: invest in developing European competitors for these American tech giants. "The root of the problem is that Europeans using these tech companies have no local competitor to buy from as an alternative in order to make sure the money earned stays in Europe. You can insist on flanking policies with taxes, but tax does not generate value, it only distributes value. Hence, we should invest a lot more in the digital economy, in digital technology and making sure Europe becomes a major player in the digital field."

Member states' leaders are divided on the matter. Today, the proposal was discussed. Ireland, Denmark, Finland, and Sweden said no. Germany showed the same concern as Jonker, namely that the US would retaliate if the EU went ahead and that the new measures might harm growth in the digital economy, so said EUObserver today. France and Germany circulate a new proposal imposing a three percent tax on revenues from online ad sales only, catching far fewer companies than in the original proposal that could be effective in 2021.

For our Dutch readers: the BNR news broadcast can be listened via the BNR Broadcast.

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