Ireland needs to defend its position in Europe’s digital future

7 Mar 2016

From Safe Harbour and Privacy Shield to Facebook and Apple’s tax affairs, Ireland is at the centre of the digital battlefield of Europe whether it wants to be or not. The decisions we make and actions we take will sum up our character in the eyes of our European neighbours, writes John Kennedy.

From our remote outcrop on Europe’s westernmost fringe, you would think we would be shielded from pivotal events, like war, etc, but because of the universal nature of the world’s digital economy, Ireland is on the frontline.

In fact, we are at the very centre of the world in digital matters due to geography and industrial policy, and it’s time to show some responsibility and backbone.

We are on the frontline of issues like privacy thanks to the presence of tech giants like Apple, Microsoft and Facebook and we are on the frontline of thorny subjects like taxation on revenues from advertising, marketing, e-commerce, manufactured goods and a lot more.

Every year, the digital economy accounts for around €50bn in exports from Ireland and the digital economy contributes three extra jobs for every digital worker in the local, physical economy, so we have a lot to be grateful for.

However, it’s time to change the tone and be more proactive, present and critical in the debates of the day, rather than acting bothered or scared every time the glare of Europe or elsewhere is upon us.

Taxing times

Ireland has and will continue to serve well the mainly Silicon Valley-based tech giants that have established headquarters here and we are right to be grateful.

I am proud that eight out of 10 of the world’s biggest born-on-the-internet companies are here, that nine out of 10 of the world’s biggest ICT companies are here and that €40bn a year of pharma exports and half the world’s chemical ingredients are developed here.

The IDA deserves credit and our gratitude for taking Ireland’s best raw material – its human capital – and turning that into industrial prowess the envy of the world. That is selling at its finest.

But with all of this comes responsibility.

While generations of Irish people may never forgive the EU for unfairly forcing the country to shoulder close to 45pc of Europe’s banking debt, the EU at the same time also made Ireland what it is today in the last decades of the 20th century. This is in terms of infrastructure and opening up vital markets and opportunities. And our role as the only English-speaking member of the Eurozone carries weight.

As our nearest neighbours in the UK make fundamental decisions whether to remain in the EU or not, our role as potentially the only English-speaking member left in the EU carries significant weight for investment. It also carries significant risk because the UK is our largest trading partner.

The EU is overdue to rule any day or week now on Apple’s tax affairs in Ireland. And, whether or not Apple is ordered to pay billions in back tax, our behaviour and conduct will be studied and noted.

Previous governments of Ireland have been right to defend the 12.5pc corporate tax rate and future governments should do the same.

When all is said and done, every country has different structures but, when the books are added up, we are just about as competitive as elsewhere. We ultimately win on the quality of people and the value companies get from their investment in Ireland.

Remember that.

Change the tone

We need to change the tone: disparaging international comment on the so-called “Double Irish” and the very sense that the last government appeared comically uncomfortable at the notion of Apple repaying taxes is unworthy of all the other good work that has been done by good people over the decades.

Speak up: there is more to the investment of these companies in Ireland than just tax breaks. The rest of the world needs to see that.

Last week, it emerged that Facebook is stopping the routing of its biggest advertising clients through Ireland in a move that will keep millions of pounds in the UK. This is an accounting change, not a people change.

The biggest advertising agencies and brands in the world like Saatchi & Saatchi and WPP are based in London. The ads were sold there but were being booked through Facebook’s Irish operations for tax reasons.

The fact that Facebook’s UK operations paid a paltry £4,300 in tax in 2014 despite the average Facebook UK worker earning £210,000 per annum was like a red rag to a British bulldog. It didn’t help matters and certainly wouldn’t endear the average UK taxpayer or its press to Ireland in any logical way.

“In light of changes to tax law in the UK, we felt this change would provide transparency to Facebook’s operations in the UK,” Facebook said in a statement. “The new structure is easier to understand and clearly recognises the value our UK organisation adds to our sales through our highly-skilled and growing UK sales team.”

The very first question I was asked about this would this mean jobs going to the UK? Why is that the standard mentality when these things happen? Do we not believe in our own abilities enough to think otherwise?

All I can say is that it’s hard to tell at this stage. It could get very interesting if Google – also under scrutiny in the UK over its tax affairs – mirrors Facebook’s move.

And this is all the more reason to believe and impress on European neighbours and US and Asian CEOs that these companies have substantial bases here – Google employs 5,000 people in Dublin across shared services and engineering and Facebook has 1,000, as well as constructing a €200m data centre – for a lot of other solid reasons, not just tax.

But we can’t impress this on others unless we believe it ourselves.

This will only change if ministers and politicians are seen to be more proactive in the debate in Europe rather than defensive.

Is Privacy Shield a weaker defence than we realise?

Sticking with Facebook, Ireland again felt uncomfortable in the glare of European scrutiny when Austrian privacy activist Max Schrems took a case against Facebook over privacy. The resulting case – given credence by NSA whistleblower Edward Snowden’s revelations of snooping by NSA and GCHQ – again showed Ireland in a poor light.

The case led to the previous Safe Harbour arrangement for US companies to shift data across the Atlantic being declared invalid.

I met Schrems last year and I could still sense how he bristled at the pivotal moment when, as a student visiting the US, he witnessed executives of US technology companies joking on stage at a lecture about how they could do anything they wished with Europeans’ data and the EU would do nothing about it.

This moment led to Schrems suing Facebook in Dublin and the road that led to the end of Safe Harbour in October only for it to be replaced by Privacy Shield.

But locally, in Ireland, the case also did a lot more. It showed a woefully under-resourced Data Protection Commission and photos of Schrems outside an office above a Centra store in Laois – a consequence of an experiment in decentralisation – went viral around the world.

For a country that found itself in the role data policeman for the world, we became a laughing stock.

As bothersome as the glare of global scrutiny was at the time, it spurred us into action. As well as appointing a first-ever Minister for Data Protection involved in filing amicus briefs to support Microsoft in its battle with the US authorities over email stored in its data centres in Ireland, the Data Protection Commission got more resources.

Data Protection Commissioner Helen Dixon is overseeing a near doubling of the office’s budget from €1.8m to €3.6m, an increase in headcount from 29 to 50 and the opening of a new office in Dublin.

Every situation has consequences, and the result of the Schrems action, as well as the ending of Safe Harbour, is a better resourced and equipped Data Protection Commission in Ireland. In a country where most of the world’s internet companies have a base, that is the responsible thing to do. But we also should have seen it coming.

But what of Privacy Shield? Is it enough to defend Europeans’ data or just a sticking plaster? More of the same, but with a bit more window dressing and theatrics?

Once pushed through, Privacy Shield promises EU citizens greater powers of redress if and when their personal data is acquired underhandedly, as well as written assurances from US partners to not abuse it. There is even a provision for an ombudsperson to advocate on EU citizens’ behalf.

Nice words, but it is not going to be a matter of if, but when, cases will emerge. And whether Ireland likes it or not, it will be in the global glare.

In their lust for growth, young Silicon Valley companies will be hellbent on acquiring data in order to provide what they believe fervently will be kick-ass services. In that race, mistakes will be made before wisdom, responsibility and experience come to bear.

Not only that, Apple’s current fight with the FBI over encryption and opening a backdoor into the iPhone demonstrates that the US is still at odds with itself on the issue of privacy and security, and that is frightening.

The engine room of the global digital economy

In all of this, Ireland, whether it wants to or not, will be on the frontline of the debate because we have become the de facto engine room of the global digital economy because of being home to so many US digital companies and data centres.

Apple is building an €850m data centre in Athenry, Galway, for example, and you can be sure that its global role in hosting data from App Store purchases to sensitive, encrypted data in iCloud will mean the fields of Athenry won’t be lying low for very long anymore.

Lying low and acting uncomfortable as vital debates about tax and privacy blast over our heads won’t cut it any longer. Embarrassing revelations about insufficient data protection resources won’t cut it any longer. Shifting uncomfortably in our seats at the threat or notion of jobs going elsewhere won’t cut it anymore.

It’s time to be strong and strident. Proactive, transparent and responsible. Whatever rival European nations jibes are about tax, we earned this industry. We built this thing, it’s time to defend it.

Geographically Ireland is on the edge of Europe. In digital terms, it is the centre of the world.

Edge of Europe image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years