In the (temporary) agreement on tariffs, the EU leaves Big Tech and rights out of the picture, thus calling into question the rules on digital sovereignty and user rights – by Andrea Monti – Initially published in Italian by Italian Tech – La Repubblica
As was widely expected, in the tariff war, the only weapon the EU did not use to reach the truce with the US signed yesterday in Scotland was the much-invoked “bazooka” — the taxation of Big Tech.
No more VAT on payments for personal data services?
After Trump called von der Leyen’s bluff, the “web tax” will have to be removed from the agendas of the Commission and national executives. But then one wonders whether the activism of national data protection authorities will also be scaled back, and — as far as Italy is concerned — that of the tax authorities and the Milan Public Prosecutor’s Office, regarding the way in which Big Tech collects and capitalises on user data.
To understand the enormous importance of the issue of data capitalisation, one must consider that the issue does not only concern VAT but also corporate income taxes. If the value of data is subject to VAT, then taxes on corporate income are also involved.
If the value of data is subject to VAT, then this data also contributes to a company’s assets and should therefore be part of the taxable income on which taxes due to the State are calculated.
Given the figures involved, and considering that the assessment of unpaid taxes would be retroactive, we are talking about staggering sums that would, in theory, have to be claimed from Big Tech — but also from all those who base their business model on data monetisation. Therefore, the indirect cost of “relaxing” the tax squeeze on Big Tech as a result of the agreement with the EU Commission could be very heavy to bear, even if not immediately felt.
The end of anti-Big Tech regulations
The consequences of this poorly played poker hand do not stop there.
The Commission’s commitment on behalf of Member States to increase purchases of US goods and services also means a review of the complex system of regulations and directives designed to counter US technological dominance.
Therefore, it would not be surprising if, in the near future, we were faced with a formal revision or substantial non-application not only of personal data protection rules but also of those on digital services that impose responsibilities on large platforms (i.e. Big Tech), those on the digital market that set limits on the commercial strategies of large hardware manufacturers (i.e. Big Tech) and those on artificial intelligence that prevent AI companies (i.e. Big Tech) from establishing themselves in the EU.
Is this the end of EU digital sovereignty and open source as a political tool for independence?
If, as seems extremely likely, not only will technological dependence on the US not be reduced but will even be increased through the ostracism imposed by the US AI strategy towards Chinese technologies, then it will be quite difficult for individual states and the EU to pursue a policy of digital sovereignty based on technological autonomy.
The direct consequence is that regulatory architectures based on open source and the creation of a European technology market for institutions and businesses will have to be modified to reflect the changed political landscape. The side effects will include, for example, the impact on public and private finances of planned obsolescence and therefore the renewal of hardware and software according to the timetable set by Big Tech rather than the needs of users, or the raising of barriers to entry for Italian and European companies in the digital market.
The real failure is to have accepted the negotiability of rights
It should be noted, adopting a political realism approach, that in international relations, strength is what counts most. Consequently, there is little point in complaining if the weaker party in a negotiation—especially if, as in the case of the EU, it has no autonomous political subjectivity—accepts unfavourable conditions or has to back down on positions that it had previously or internally declared non-negotiable.
This does not detract from the fact, however, that the conditions accepted by the European Commission to avoid US tariffs necessarily involve the sacrifice of rights that, until now, were considered sacred and in the name of which draconian rules and million-dollar sanctions were imposed on operators (US) in the digital ecosystem. Therefore, in the face of the impending deregulation — whether de facto or de jure — it will be quite difficult to convince citizens and businesses in the Member States that, in the name of “state’s interest” (but of which state?), it will be necessary in the near future to accept a substantial limitation of the prerogatives that the EU has always claimed to place at the heart of its decisions.
Cassandra and the technological leopard
However important these future changes may be, they will be little noticed by most people. Consequently, it is unrealistic to imagine that the von der Leyen Commission will face criticism from observers and political opponents on this front.
On the other hand, it is simply a matter of leaving things as they are, given that technological dependence (not only) on the US is a fact of life to which we have all become accustomed over the years, despite declarations and initiatives, without anything changing.
What makes this part of the ‘deal’ bitter to swallow, is that over twenty years ago, some Cassandras had even warned the government in power — and as in the story of the original Cassandra, we already know how it could end.