Is it the attractiveness of the new technology? The idea that disruptive innovation also has a little impact on the entire country. Is it the sacred belief in a good business climate? Or is it simply the prospect of flat economic gain, however futile? The fact is that with the rise of the internet economy, many American companies in particular can count on a warm reception in countries where they want to establish themselves. No country wants to be the last to bring in services like Netflix, Airbnb and Uber. And whoever succeeds in taking a fiscal piece of the bill from the billion-dollar festival shows itself to be a modern government. The fact that the public interest is lost sight of is unfortunately the rule rather than the exception.
The method of the platform economy is now well known: the disruptor comes up with a simple, technical solution for an everyday problem. An app is being built, and then it is rolled out halfway around the world in record time with investor money. Preferably so quickly that governments and enforcers have no idea how the new service works, let alone whether it is all allowed, in accordance with local legislation (employment conditions, use of permits, taxes). Profit is not made, the primary goal is mainly market dominance, following the example of Google, Facebook and Amazon.
In the case of taxi and delivery company Uber, it was exactly the same in 2014. Last week leaked via The Guardian and the International Consortium of Investigative Journalists (ICIJ) issued 120,000 memos, minutes and internal emails describing how Uber lobbied European parliamentarians and ministers for favorable legislation. What Uber did was so new and groundbreaking that there was no legislation. And the more the new rules molded around Uber’s business model, the more beneficial it was for Uber.
The image that emerges from the Uber Files rising is not pretty. It shows a tech company that mainly fights to maintain its own position, and does not shy away from playing governments against each other. And, even worse, it shows governments and public administrators who are happy to go along with it. From Emmanuel Macron (Economics Secretary in 2014) to Joe Biden and British Prime Minister David Cameron, they all went out of their way to help the company.
In the Netherlands, Uber received support from VVD celebrity Neelie Kroes, who deployed her personal network in 2015. Kroes – until the end of 2014 European Commissioner for Digital Affairs – was not allowed to do that at all. As a former supervisory director, she had to observe a cooling-off period of eighteen months before being allowed to work in the sector for which she was administratively responsible. Kroes knew that, so he asked the Commission twice for permission, was also given a ‘no’ twice, and did it anyway. She formally joined Uber in 2016.
The Dutch tax authorities also took a very cooperative stance towards the newcomer. At that time, the Netherlands already housed Uber’s European headquarters, which means that the trips of all Uber drivers outside the US were only registered in the Netherlands. Tax authorities in other European countries (Sweden, France, Belgium, the United Kingdom and Germany) wanted to know whether Uber drivers paid VAT and income tax, so they submitted a request to the Dutch tax authorities. He then trained that endlessly to give Uber the opportunity to lobby. In addition, officials shared classified information with Uber, according to the documents. They may have committed criminal offences.
The managerial blindness to innovative companies like Uber is dangerous. You would think that Europe would have learned its lesson after the difficult experiences with recognized ‘rule benders’ such as Facebook, Google and Amazon. It is not for nothing that European Commissioner Margrethe Vestager has imposed fines on these companies in the past few years because of their excessive market power. At the same time, taxing innovative disruptors undermines this policy and that is bad. Just as much as Kroes’s behavior is. It further erodes citizens’ trust in their own governments, at a time when that integrity is already under a magnifying glass. Acquisition of companies is part of it, sure, but giving them free rein against the applicable laws and regulations is a step too far.
Tech companies are not philanthropic institutions that come to rescue European workers, that much is clear by now. It is essentially capitalist parties that go for the lowest rate and the highest personal return. As long as Europe does not take this seriously, and individual countries continue to go at the expense of others for an extra shred of tax revenue, citizens will ultimately pay the price.
A version of this article also appeared in the newspaper of 16 July 2022