Tuesday, 7 January 2014

Taxis and taxes: More "threats" to the European way of life? (part II)

A couple of days before Brussels shut down for winter holidays, I was reached by an email that my op-ed on internet taxation in France and Italy is one of the most popular articles on European Voice. Seems self-deprecation and black humour still have some mileage, even in the self-important Brussels – and I still have a full tank of it, thanks to a never-ending supply of 'laugh or cry' news stories about how European governments are trying to reverse time, back to an era before globalisation and the internet.

The new year starts with another piece of French legislation in the same vein as the accusation against Amazon for 'dumping' over its free delivery service. This week's irritant in the l'Elysée palace is minicab services – they have existed in Paris as a cheaper alternative to the regular taxi parisienne that are overregulated, overpriced and grossly undersupplied. These cheaper minicabs were not a problem until they went online, where services like Uber, Chaffeur-Prive.com offered direct booking via smartphone apps using GPS.

On New Years Eve, Libération reported that the ministers Pinel (of Crafts, Commerce and Tourism) and Valls (Interior) signed off a decree that forces les voitures de tourisme avec chauffeur (an euphemism for French minicabs ordered via smartphones) to wait 15 minutes before picking up their clients, despite drawing heavy handed critique from the French competition authority. The only exception is for guests of four or five star hotels and convention centres. Hollande government may not alone in its anachronistic desire to protect mercantile guilds from modernity, but it represents a unique brand of socialism that deprives cheaper and expedient services from the masses (and trade wonks eternally doomed to stay at 3½ star hotels), while unashamedly exempting les riches over at Sofitel.

This granular and unsophisticated form of picking losers is more reminiscent of ... an emerging country, not the more elegant form of nepotism we disguise as politics in Europe.

Speaking of picking losers – the Italian 'internet tax' proposal that required all online retailers in the world to register for italian VAT in order to collect taxes for the upcoming pension payment has now been approved. Final draft of this timely tribute to the King Herod (holiday season and all) was limited to 'online advertising' and 'business services'. It is not without a certain sense of trepidation that I admire Italy's zeal to tax a couple of very specific entities, despite the clear violation of the freedom of services in the Single Market – it's obvious that an European business should not acquire 28 VAT registration to operate in the EU. 

However, Brussels is far away from Palazzo Madama. In Rome, where internet companies are too minor to have patron saints in politics, it's a pretty safe bet to act in outright contempt against EU laws – especially in times when US electronic surveillance spooks the Italian public. In my early life as an advertising executive, I learned that the Italian advertising industry was notoriously unscrupulous where TV, print and media agencies blocked any foreigners and newcomers attempting to bypass their established system of kickbacks. As a result, the very few digital enterprises and innovations that sprung out of Italy are linked to fashion retail. 

If we leave aside the minor problem of giving il dito to DG Markt and other member states, the situation in Italy is the essence of the problem of the European digital economy: Italy and European countries had all the market institutions and infrastructure necessary to foster a reasonably successful internet economy, but failed to secure the open competition and regulatory certainty that were necessary to create a favourable investment climate. Audacious and opportunist politics do not restore the market's confidence in the government (which is arguably an underlying cause for Italy's desperate fiscal measures in the first place) – and in extension, how early and how hard the European Commission and other member states come down on Italy will determine how credible the Single Market is. 

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