Galway City Tribune - Opinion Piece
Irish jobs may be devastated by on-line commerceAugust 10, 2012 - 8:42am
A GOVERNMENT-BACKED agency has warned that the growth of online shopping in this country could devastate the Irish economy unless a drastic national digital strategy is put in place.
The warning from the Digital Hub Development Agency should not be taken lightly, as it estimated that Irish consumers will spend more than €20 billion online each year by 2017.
The agency wants to see a strategy to ensure indigenous companies strengthen their share of the online market place to prevent an ‘immense’ loss to the economy.
It said more jobs could be created, and more profits made for Irish firms, if consumers here bought more online products from indigenous firms.
But the reality is that only 20% of Irish companies have an online presence compared to 40% of firms in the UK – and this is what needs to change.
The reality is that – because of their presence and the attraction of the companies and goods for sale – most of the money spent online by Irish consumers goes to companies in the UK. And this creates the potential for both a massive drain on the state coffers and a devastating loss of existing jobs in this country. Irish consumers already spend close to €4 billion online each year but a massive 75% going overseas, mainly to the UK.
One of the areas already suffering from the exodus to the net is the Irish betting industry – even punters at racetracks are using their mobile phones to place bets on the net while checking the odds with the on course bookies – although the introduction of new legislation will go some way to addressing this.
The Government will introduce an online betting tax in the hope of raising €50 million over the next three years – but the knock-on effect of that is to level the playing field so that bookie shops and on-course operators are not the only ones forced to contribute a slice of their profits back into the industry.
Currently bookmakers pay a 1% tax on their shop profits and the proposed legislation would extend that tax to their online profits, while betting exchanges such as Betfair would be subject to a 15% tax on their gross profits.
The upshot of all this is to both level the playing field and add much needed revenue to the state coffers – a blueprint that could well be repeated across the entire digital sector in the future.
The problem is that overseas bookmakers taking online bets from Irish customers might not comply with this proposed tax on internet betting.
So clearly there are intrinsic difficulties in policing any tax that involves overseas or out of reach companies, but that’s where international tax legislation comes into its own.
Given that there has already been such an exodus away from the traditional store to the internet, the threat to existing employment is obvious – but equally attempting to stem that is like trying to hold back time.
The simple solution is to make goods liable for tax in the country in which they are consumed – although enforcing that will be the key.
It’s a problem that’s not unique to Ireland of course – the US Senate’s Commerce Committee was grappling with the problem last week where the income potential is clearly a multiple of ours.
The DHDA recommends tackling this from a more positive perspective through re-education – particularly of marginalised groups – to train people in the skills required in a digital economy, as well as the roll-out of a world-class communications infrastructure.
The Government is already committed to that broadband roll-out, but this underlines more than ever how crucial it is to our growth and prosperity.
Because the future may be global – but we still want to ensure a big slice of it stays close to home.