United Digital European Union

Posted on 26. February 2015

by Milan Balaban

milan-balaban2For the past couple of decades internet conquered the world at an almost unimaginable speed. It became the Wild West of the world. In the words of writer Viktor Bartol: “Nothing is real, everything is permitted”. However, as we are cruising gently through the second decade of the 21st century, things are about to get real – very real.

E-books, unlimited access to news and videos, social media; just some of the delights of the internet we enjoy on a daily basis. Some of us do it legally, others… not so much. The European Union, much like many other governments around the world are catching up and are embracing the digital sphere. Between 2008 and 2013, EU citizens downloaded over 40 billion apps; 50% of those were downloaded in 2013. That’s a lot of apps. As kids and grownups alike begin to understand what technology can actually do for them, we will see an exponential increase in the consumption of digital goods. Imagine that an app costs a single euro, on average. That’s €40 billion in revenue from apps alone. Now think of the broad spectrum of digital goods. It is a vast economy.

Since 1 January 2015, new digital taxation laws have come into effect in Europe. Under these new rules, which encompass both e-books and smartphone apps, it is projected that governments will stand to benefit from €1 billion extra in annual tax revenues. It will be interesting to observe how companies are going to react to such a policy. Certain companies like Apple and Amazon, which are famous for avoiding these taxes, are already housed in countries like Luxembourg and Ireland, both low tax countries. For example, the value added tax (VAT) on e-books in Luxembourg is only 3%, while Great Britain imposes a stunning 20%. It is obvious that such a disparity cannot last forever.

Luxembourg will have to adapt and change. In fact, they will be raising VAT on most e-goods from 15% to 17%, while still offering discount rates on certain digital products. At this point in time, it’s difficult to speculate how the ‘big picture’ is going to be affected. It is, however, very possible that revenues collected in Luxembourg are about to decrease.

As the popular saying goes : taxes and death are the only two things that are certain in life – and raising taxes is definitely not a popular option. Taxing the digital revolution is one way of trying to control it, yet I believe that trying to restrain a behemoth is impossible, and the backlash could be severe. The internet seems to be one of the rare examples of true democracy and, while understanding and using the internet is probably the single most important endeavour in human history, attempting to control it might prove too big of a challenge for governments around the world.

If you would like to learn more about the impacts of the internet and the digital world on the EU, here is a Digital Agenda Scoreboard 2014. It is an illustration of how EU plans to integrate (and perhaps control) the internet.

What point of control should be exercised on the internet and the digital economy in the EU and the world in your opinion ?