Brussels-based lobby group DigitalEurope is drafting its own proposal outlining how much money should be earmarked for investment in the tech sector as part of the EU’s next budget.
Its director general, Cecilia Bonefeld-Dahl, said in an interview the association wants the EU to double the amount of funding going into technology. Bonefeld-Dahl wants the budget to focus on artificial intelligence, telecoms networks, cybersecurity and improving tech skills.
The Commission will announce in May its post-2020 budget proposal. Negotiations are expected to be especially fraught as leaders will need to find a way to fill the gap left once the UK leaves the bloc. The UK pays around €12 billion per year into the EU budget.
European leaders are about to start discussing the next long-term EU budget, the MFF. French President Emmanuel Macron proposed that there should be an EU version of the US agency DARPA to fund high-tech research. The Commission wants to focus on high-performance computers and artificial intelligence. What should the next EU budget fund in the tech sector?
I see some chance that we’re getting there. There are three or four factors that we need to look at. I would say data-driven technologies. So there’s AI, artificial learning and everything that is in that box AI. This will not only transform our sector, it will transform all sectors. From health to manufacturing and the public sector not least. And I think the most important is really having a strategy and an investment strategy on what type of initiatives you’d like to put money on in AI.
Another one is connectivity. We suffer like hell, we’re really behind compared to the rest of the world on connectivity. 5G can be seen as a technology, it’s a technology family. We’re definitely not finished. The research and development on connectivity will not be the same in ten years. And we’re on the second wave now and the rest of the world is moving ahead. I really see connectivity as something totally crucial for all sectors, for unity in Europe. if you have self-driving cars and they reach a border and have to go to a different network, what do you do? Slow down while driving? It’s about a high-speed society that brings social inclusion so everyone can access the modern economy, both for SMEs and big industry, that they really can unfold their growth potential. Connectivity, AI. And one last thing on everyone’s lips is security. We need to learn how to navigate how security technologies are used in a much more structured way. These three things are definitely areas that we need to look at: security, AI and connectivity.
It’s important to think of how we use digital for horizontal investment across all sectors. But also to dedicate a real budget of its own, and in that budget or another bucket, looking at how to bring digital skills to the table. We need to boost that. It’s wonderful to have an elite that can really connect with it but right now 90% of young people right now spend 8 hours on their phones using IT, but I’d say 99% have no idea how anything came into this device, how they’d be able to have other people create it, and no idea how to do it themselves. I find that a disaster. It’s like we left a whole generation behind as digital users, not digital creators.
Should there be more EU money invested in tech?
Yes, of course. We’re looking right now at double. But let’s see now that the UK is going how the budget funds will be. But we know that companies that are digital create 40% more profits than others and profits mean jobs and jobs mean people have a good life, it means tax going back to society. Digital shouldn’t become a buzzword. It’s just a tool, it’s a way of handling the world that everybody else is doing and we need to be on top of it.
You started this job around one year ago and you’ve been focusing on SMEs in the tech sector as one of your main issues. DigitalEurope is still known as representing ‘big tech’. Google, Microsoft, Amazon and Apple are your members. Are you trying to change DigitalEurope’s image?
No, I’m actually just trying to make the image of what we really are and always have been. We have direct memberships, which are mainly multinationals in one chamber and then we have 40 associations on the other side representing 30,000 companies, 99% of them SMEs around Europe. So this is something we have always been.
But as a lot of SMEs are not present in Brussels, one of my main priorities was to bring Brussels to the people and the people to Brussels. To really leverage the knowledge of how an SME functions, what choices they make every day and what regulatory initiatives mean in their world. What does it mean right now in the investment framework that there’s much more focus on digital skills, digital hubs, on SMEs? That knowledge should actually reach them, but also their knowledge actually should reach Brussels. The SME award is actually a part of my vision of bringing Brussels to their countries and then the countries to Brussels.
Right now we see a lot of growth and SMEs are growing more quickly than the rest of the economy and it is a period where we might foster some really cool tech giants here in Europe. But to do that we need to realise what changes they face before they just get sold, before they even reach a certain size.
Does the Commission’s digital single market programme help big tech giants more than smaller European companies?
I think we need to realise the reasons behind regulatory initiatives, they’re bringing all of us benefits. We can disagree sometimes on the details of them. But harmonisation through regulation is something that we need to have one unified market to grow, also for SMEs. Then we can discuss the concrete articles and how it’s drafted. But in general, harmonisation through regulation and common regulations is a good thing for SMEs. But of course there’s always the built-in contradiction that bigger companies have more money and when regulation and changes in regulation cost money then they have an easier time adapting to those changes than small companies do.
EU countries are taking different approaches to how they regulate tech companies. We see Macron trying to promote an image of France as a startup nation. Are his initiatives enough to actually change the French tech sector?
Of course it is a good thing. There’s no contradiction between big companies’ growth and small companies’ growth. There’s an ecosystem growing out of the same economy, and right now the economy is good. I think it’s nice to have a French leader stepping ahead and saying we want digital and SME growth, it’s not something we’ve seen from France before.
And it brings to the table also a focus and an understanding of what the issues are for smaller companies and why we have two-thirds of all SMEs, the unicorns, the high-fliers that can really grow, being sold within the first two growth phases. We have to focus on that. I’m not saying that no company should ever be sold, but that kind of nearly automatic consolidation, that each time a unicorn that can really grow into something larger, it gets to a certain level and it gets sucked up into larger corporations. For a lot of innovative and traditional industries that are buying tech companies, this is good. But there must also be some kind of awareness about why. It has to do among other reasons with market fragmentation in Europe. It’s still not a unified digital single market. I think that’s the main driver, the fragmented market.
We’re still expecting a few tech-related announcements from the Commission before its term ends next year. One is Commissioner Pierre Moscovici’s plan to introduce a new way of taxing digital companies next month. How could that affect European tech firms?
It’s something I chose actively to engage on because it’s a political problem, it’s a perception issue. And I think the whole discussion can give a wrong impression of the industry. It can have a huge impact on image, but of course also on financials. But as sometimes perception is reality, you need to handle that perception that there is a problem. We are leaning towards global frameworks. We understand there will be a kind of global EU steer and even a scope limitation so it will be limited to certain type of companies. At least that’s what we hear through the grapevine right now. I hope it can be done in a way that we don’t close our borders and hamper a specific type of industry. It’s a very complex issue because of course, we believe everybody should pay tax. But we also believe you should be fair and not single out an industry and say you need to pay tax because you’re a digital company. If it has to be done, it has to be done in a way that’s not like singling out innovative companies. Which could also hamper Europe because they’ll put their investments elsewhere. Let’s face it, they had a big financial impact on the growth of SMEs, creating a lot of networks for SMEs. Many of them replaced the old distribution chains of shops and brought costs down, which also means that SMEs have more available cash for anything else.
The Commission says digital companies pay an average tax rate of 9% in the EU, while other companies pay 23%. Moscovici said last week his staff is for now still trying to identify where these companies make profits.
The good thing is they don’t seem to be totally focused on saying it has to be like this. They’re exploring different solutions. There was talk of taxing where you get data from the user. Because the user gives data and that is seen as value creation. I cannot see how this can be done and I’m not sure it’s the right solution. Giving your data is something you do to receive a service, so to me, this is very, very difficult to look at. All the tax experts I’ve spoken to also cannot see how this thinking can apply in a modern society.