Europe will go it alone on digital tax reform in 2021 if it must, says EU president, as bloc directs €150BN in COVID-19 relief toward cloud, AI and broadband

Europe will propose its own digital tax early next year if there's no agreement at a global level on how to update taxation rules for the Internet age, EU president Ursula von der Leyen said today, reiterating the bloc's determination not to let tax reform slide in a state of the union' speech to the European Parliament.

We will spare no effort to reach agreement in the framework of OECD and G20. But let there be no doubt: should an agreement fall short of a fair tax system that provides long-term sustainable revenues, Europe will come forward with a proposal early next year," she told MEPs.

In the wide-ranging speech - which also called for the 2020s to be Europe's digital decade" - von der Leyen committed the bloc to spending a fifth (150BN) of the 750BN coronavirus support fund announced earlier this year on digital investments.

There has never been a better time to invest in European tech companies with new digital hubs growing everywhere from Sofia to Lisbon to Katowice," she said. We have the people, the ideas and the strength as a Union to succeed. And this is why we will invest 20% of NextGenerationEU on digital."

We are reaching the limits of the things we can do in an analogue way. And this great acceleration is just beginning. We must make this Europe's Digital Decade," von der Leyen added.

We need a common plan for digital Europe with clearly defined goals for 2030, such as for connectivity, skills and digital public services. And we need to follow clear principles: the right to privacy and connectivity, freedom of speech, free flow of data and cybersecurity.

But Europe must now lead the way on digital - or it will have to follow the way of others, who are setting these standards for us. This is why we must move fast."

Beneath the rousing digital sovereignty' rhetoric, the speech didn't offer much new on the tech policy front - but the EU president confirmed that updates to Europe's competition rules and regulation on the use of AI are coming next year.

The Commission is currently consulting on whether a new competition tool is needed to respond to digital network effects that can lead to tipping markets, as well as more widely around a forthcoming Digital Services Act (which didn't get any direct mentions in the speech).

On personalized data - business to consumer - Europe has been too slow and is now dependent on others," she said. This cannot happen with industrial data. And here the good news is that Europe is in the lead - we have the technology, and crucially we have the industry."

We presented our new industry strategy in March to ensure industry could lead the twin green and digital transition. The last six months have only accelerated that transformation - at a time when the global competitive landscape is fundamentally changing. This is why we will update our industry strategy in the first half of next year and adapt our competition framework which should also keep pace," she said.

Tech investment priorities

Priorities for digital investment she highlighted are the plan to build a European cloud - which will be based on the GaiaX federated data infrastructure that's developing common requirements for pan-EU data sharing. (This is part of a major Commission push around industrial data reuse, announced earlier this year.)

The second area of investment focus named was artificial intelligence - with the EU president citing the tech's potential to deliver innovations such as precision farming in agriculture, more accurate medical diagnosis and safe autonomous driving". However she also emphasized the importance of having rules in place to wrap around the tech, reiterating EU lawmakers' conviction that a framework is needed to ensure what they dub human-centric' AI.

Earlier this year the EU put out a white paper - setting out proposals for regulating high risk' applications of artificial intelligence. Though the final shape of the proposal will have to wait for 2021.

von der Leyen also suggested lawmakers are looking for ways to give consumers more control over how their data is used in the big data-powered AI era.

We want a set of rules that puts people at the centre. Algorithms must not be a black box and there must be clear rules if something goes wrong. The Commission will propose a law to this effect next year," she said today.

This includes control over our personal data which [we] still have far too rarely today. Every time an App or website asks us to create a new digital identity or to easily log on via a big platform, we have no idea what happens to our data in reality."

To this end, she said the Commission wants to develop a secure European e-identity" that EU citizens could use anywhere in the bloc - to do anything from paying your taxes to renting a bicycle". It would be a technology where we can control ourselves what data and how data is used", she added, riffing on her digital sovereignty theme.

The Commission is reviewing existing regulations around eID, including running a consultation that's due to end next month - where it says it's looking at barriers to uptake of eID and trusted services, and considering how to evolve the framework towards an EU digital identity".

It now sounds like lawmakers have concrete plans to overhaul eID - with the aim of promoting a proprietary digital authentication mechanism that can help drive the wider strategy around digitization and data reuse.

The third focus for COVID-19 relief' digital spending is infrastructure, with a push planned around broadband access.

The investment boost through NextGenerationEU is a unique chance to drive [broadband] expansion to every village. This is why we want to focus our investments on secure connectivity, on the expansion of 5G, 6G and fiber," said von der Leyen, adding: NextGenerationEU is also a unique opportunity to develop a more coherent European approach to connectivity and digital infrastructure deployment."

Her speech also highlighted a planned 8BN investment in developing next-gen supercomputers. And reiterated calls for European industry to develop its own next-generation chips - that will allow us to use the increasing data volumes energy-efficient and securely".

None of this is an end in itself - it is about Europe's digital sovereignty, on a small and large scale," she added.

Green Deal

von der Leyen also spend a fair amount of time on the environment and the risks attached to climate change.

The EU president revealed that the Commission is proposing to increase the 2030 target for emissions reduction from 40% to 55%.

The European Green Deal is set to account for a larger chunk of COVID-19 relief spending than digital projects - although there could, presumably, be some overlap, with von der Leyen talking about a world where we use digital technologies to build a healthier, greener society".

She said 37% (277BN) of the NextGenerationEU fund to be spent directly on Green Deal objectives.

This spending looks set to give a major boost to electric cars via investment in charging infrastructure. Other areas of focus she mentioned are hydrogen replacing coal for industrial production; and adapting the construction industry to make it more sustainable and less polluting, including by the use of AI and smart technologies.

NextGenerationEU should invest in lighthouse European projects with the biggest impact: hydrogen, renovation and 1 million electric charging points," she said. I want NextGenerationEU to create new European Hydrogen Valleys to modernise our industries, power our vehicles and bring new life to rural areas."

Our buildings generate 40% of our emissions. They need to become less wasteful, less expensive and more sustainable," she added. And we know that the construction sector can even be turned from a carbon source into a carbon sink, if organic building materials like wood and smart technologies like AI are applied."

The systemic change needed to support a wholesale shift to a circular economy was dubbed"a new cultural project for Europe".

Every movement has its own look and feel. And we need to give our systemic change its own distinct aesthetic - to match style with sustainability," she said, announcing a plan to set up a new European Bauhaus" - aka a co-creation space where architects, artists, students, engineers, designers work together to make that happen".