Sunday 16 December 2018

Editorial: 'A challenge for high-tech Ireland'

'For example, Apple, Microsoft, Amazon, Google and Facebook have a combined market capitalisation of $3.7tn, equal to Germany’s GDP last year.' Photo: Getty Images
'For example, Apple, Microsoft, Amazon, Google and Facebook have a combined market capitalisation of $3.7tn, equal to Germany’s GDP last year.' Photo: Getty Images
Editorial

Editorial

The statement last week by Tim Berners-Lee, the computer scientist who invented the world wide web in 1989, that technology companies have grown so dominant that they may need to be broken up, unless challengers or changes in taste reduce their clout, is the latest in a growing body of opinion that believes the manner in which some companies operate internationally will eventually be brought to an end. "I am disappointed with the current state of the web," Berners-Lee said. "We have lost the feeling of individual empowerment and to a certain extent, I also think the optimism has cracked."

The digital revolution has spawned a handful of US-based technology companies since the 1990s that now have a combined financial and cultural power greater than most sovereign states. For example, Apple, Microsoft, Amazon, Google and Facebook have a combined market capitalisation of $3.7tn, equal to Germany's GDP last year. Ireland is heavily dependent on such companies, directly and indirectly. At times of plenty, many of these and others provide a bountiful supply of corporation tax which is a boon to Government coffers. There was further evidence recently, when an unexpected surge in corporation tax receipts helped fill a financial black hole in the Department of Health. As has already been said, the State can not rely on such an unpredictable income stream into an indefinite future, nor allow such black holes to develop in the first place.

On another front, a much touted EU-wide digital tax is being proposed. Indeed, the European Commission is preparing to roll out a 3pc digital tax proposal at the forthcoming meeting of finance ministers. It has been said that such a tax would represent a dangerous precedent and would lead to tax harmonisation by the back door. The digital tax plan will target revenue earned rather than profit and will reward larger countries at the expense of smaller ones. Meanwhile, a process is under way at OECD level that offers another pathway to dealing with digital companies.

Finance Minister Paschal Donohoe has said Ireland is awaiting the outcome of this process. He has also said that Ireland is committed to ensuring our tax regime is stable, legitimate and transparent, to support continuing investment and job creation in the State. This is as it should be.

However, from recent developments, it is clear that steps are being taken to curb the financial and cultural clout of tech companies. On the one hand, it is difficult to disagree that such steps need to be taken, and we do not wish to disagree. The manner in which the consultancy, Cambridge Analytica, obtained the personal data of 87m Facebook users perhaps represented a tipping point in this regard. There have been many such points before and, no doubt, will be more such in the future. It is, perhaps, pointless to await or even to expect high-tech self-regulation in this area. The reach of government into such companies is to be cautiously welcomed, but with safeguards required to ensure that government does not reach so far to curb free speech.

The Government here must keep across all of these developments and stay on the right side of whatever balance is struck by the international authorities. In that regard, we agree that the outcome of the OECD's deliberations is the correct path to follow. It would also be remiss of Government here not to closely monitor the speed of innovation in technology and tastes, which could ultimately reduce some of the biggest firms down to size in any event. It is also important that Ireland's dependency on corporation tax receipts is reduced. The end is not nigh for high tech; indeed, it is only beginning. But the end is nigh for the manner in which these companies have been allowed to operate. That is no harm.

Sunday Independent

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