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Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland.
Will Trudeau’s digital services tax lead to trade dispute?
After all, US Ambassador David Cohen warned in July that if Canada introduces such a tax, his country would have “no choice but to take retaliatory measures in the trade context, potentially in the digital trade context.” Canadian Finance Minister Chrystia Freeland, no stranger to trade disputes with her American friends, appears determined to proceed.
"It's really a matter of fairness," she said. "There are other countries, our partners, who are today collecting DST. That DST is helping make essential investments in their countries, and it's just not fair for Canadians to be deprived of that revenue."
The Canadian argument is that tech companies collecting billions of dollars of revenue in Canada — like Netflix and Amazon — are able to shelter their profits in low-tax jurisdictions and are not contributing meaningfully to the economy. The Americans, unpersuaded by these arguments, don’t want to see Canada break from an OECD consensus, which is to wait until there is an international tax agreement. Business groups in both countries have asked Canada to hold off to avoid the uncertainty and disruption of a trade dispute.
The new legislation introducing the tax did not include a date, which means the government could implement it when it sees fit. Freeland may be hoping that it gives her leverage in trying to convince her American counterparts to accept the tax without imposing countervailing duties.
Estonia's digital revolution: a global model of efficiency
In a recent GZERO livestream event presented by Visa, Carmen Raal, a digital transformation advisor and expert from e-Estonia, shared some remarkable insights into the nation's digital transformation. Estonia, often hailed as a digital pioneer, has undergone a profound digitalization process that sets it apart on the global stage. Carmen explained that 99.99% of Estonia’s public services are accessible online, which includes a strong collaboration between the nations’ public and private sectors. Raal points out how this unique partnership has created solutions that are versatile and user-friendly. One example is Estonia's electronic identity and signature system which isn't limited to government use; it extends to online banking across all banks in Estonia.
The emphasis on simplicity has been key to encouraging widespread adoption of digital solutions. This also includes the process of setting up a company in Estonia. Raal highlights that it takes less than three hours to establish a company online, and the world record is a just a hair over 15 minutes. According to Raal, this efficiency, especially for small and medium-sized enterprises, has positioned Estonia as an administrative haven, attracting entrepreneurs from around the world under the concept of e-residency, which allows individuals worldwide to obtain a digital identity card, granting them the ability to run an Estonian company without physical presence in the country. This offers access to the European single market, showcasing Estonia's commitment to fostering a global digital community. Raal highlights how Estonia's digital journey underscores the transformative potential of embracing technology, not only for enhancing efficiency but also for fueling economic growth and innovation.
To hear more about the challenges and opportunities that nation-states face when it comes to digitization, and how it could shape a more inclusive and resilient future, watch the full livestream conversation:
What Ukraine's digital revolution teaches the world
Empowering small businesses in the digital age
Rajiv Garodia, global head of government solutions for Visa, delved into the critical role of small businesses in the modern economy, particularly in the context of the COVID-19 pandemic. In a GZERO livestream event presented by Visa, Garodia says the pandemic exposed vulnerabilities of small and medium sized businesses including the lack of digital skills among many small business owners. As consumer behavior shifted towards digital channels, small businesses found themselves unable to keep pace. The ability to collect payments became increasingly reliant on digital transactions and those unable to offer digital payment options risked exclusion from the broader economy.
To address this issue, Rajiv emphasized the importance of collaborative efforts between the private and public sectors. He says governments and businesses must work together to equip small businesses with essential digital tools, from fostering digital literacy to providing necessary technology solutions, such as creating digital storefronts, enabling digital payment acceptance, and utilizing digital tools for accounting and inventory management.
Technology plays a pivotal role in leveling the playing field for small businesses. Rajiv shared an ambitious initiative aimed at digitally empowering 50 million small businesses by 2023. The innovation here lies in simplifying access to digital payment infrastructure by enabling smartphones to accept payments, a transformational leap towards digital inclusion for small business owners.
To hear more about the challenges and opportunities that nation-states face when it comes to digitization, and how it could shape a more inclusive and resilient future, watch the full livestream conversation:
What Ukraine's digital revolution teaches the world
Ukraine’s digital lifeline: Diia
In GZERO's livestream event presented by Visa, chief innovation officer of USAID, Mohamed Abdel-Kader shed light, on Ukraine's groundbreaking eServices platform known as Diia. This platform, he emphasized, has significantly strengthened the connection between the government and its citizens—a vital development for Ukraine, particularly amid the ongoing brutal war with Russia. Abdel-Kader say’s Diia has transitioned from primarily serving procurement and basic services to now facilitating reporting of property damage and unemployment status management during crises, which has been vital for providing immediate support to citizens and, equally important, rebuilding trust in government responsiveness.
Mohamed Abdel-Kader also highlighted that 19 million people use Diia and the frequency of interaction depends on individual needs and activities. Some might use it for tasks like obtaining a digital driver's license or paying taxes online. Additionally, Abdel-Kader emphasized the robust security measures in place, highlighting that user information is distributed across multiple servers, not stored on a single device, ensuring data safety, especially in the context of the ongoing conflict.
Lastly, Abdel-Kader noted that Diia's success has sparked interest from other countries looking to adopt a similar system tailored to their specific needs, promoting a global exchange of innovative solutions in the realm of digital governance.
To hear more about the challenges and opportunities that nation-states face when it comes to digitization, and how it could shape a more inclusive and resilient future, watch the full livestream conversation:
What Ukraine's digital revolution teaches the world
What Ukraine's digital revolution teaches the world
The threat of the Russian bear has been putting its neighbors on edge for years, and while plenty has been spent on beefing up their militaries, there’s now a whole other line of defense: digitization. Kyiv has harnessed its digital technology to provide government services to a whopping 19 million Ukrainians, despite daily bombings and devastation.
How has digitization helped Ukraine navigate first a pandemic and now a war? What lessons can be learned by other countries? GZERO asked geotech experts in a livestream event, presented by Visa, about the challenges and opportunities that nation-states face when it comes to digitization, and how it could shape a more inclusive and resilient future. The event was moderated by Goodpods' JJ Ramberg. Watch the full discussion above.
In 2020, Ukraine launched Diia, a mobile application that connects Ukrainians to more than 120 government services – from digital driver’s licenses to business filings to tax payments, says Mohamed Abdel-Kader, who helms the Innovation, Technology, and Research Hub at USAID. He and his teams help countries adopt new technological innovations in effective ways. Since the war, the app – also forged in partnership with UK Aid, Eurasia Foundation, and private sector partners – has also helped address wartime needs. For example, it has helped Ukrainians claim benefits for war-related property damage, and, at times, has been used to broadcast news and video when other networks are down. It has also helped with Ukraine’s mobilization and enabled the reporting of Russian troop sightings.
Unsurprisingly, it was another former Soviet republic, Estonia, that emerged as a pioneer in digitization back in the 2000s. Being so close to that Russian bear – it’s just a three-hour drive from St. Petersburg to the Estonian border town of Narva – helped focus the digital mind. The country was already a digital leader, but in 2007, Estonia withstood a month-long cyberattack that crippled its government systems and digital infrastructure. There was speculation of Russian involvement, but it was a “blessing in disguise,” says Carmen Raal, a digital transformation adviser at e-Estonia, the country’s electronic government services. This is because it forced the country to focus on cybersecurity before it was of critical importance to private and public sectors. The resulting innovations, she adds, have made Estonia a world leader in cyber security.
Today, Estonia offers 99.99% of its services online, Raal says, including universal online banking solutions and super-quick business setups. It takes “less than three hours to establish a company and, of course, it can be done fully online,” she adds.
What’s more, Estonia offers something called e-Residency, enabling individuals from anywhere in the world to apply online for a digital identity with which they can establish businesses in Estonia. “We have over 100,000 e-residents, and they have established over 27,000 Estonian companies,” Raal texted me after the event.
When it comes to digitization, both Ukraine and Estonia offer models of early investment, evolution, responses to security crises, and government-citizen relations, while the Estonian services reflect how governments can help residents (near and far) embrace economic opportunity. But globally, there remains plenty of work to ensure access, equality, and trust.
Digitization, after all, is great for those in the game, but as the rich get richer, governments need to ensure everyone has access. Last year, 60% of global GDP was generated by digitally enabled businesses, and in the last five years, the world has added two billion new internet users.
As the trend of digitalizing continues, with technology transforming businesses and work, says Eurasia Group's Geotechnology Director Alexis Serfaty, “it’s absolutely going to create new opportunities and new wealth, especially, I think, in emerging markets with younger populations and with more robust digital public infrastructure." In other words, there has been record growth in access, but there are still 2.5 billion people worldwide who are not online, and better systems and expanded access could translate into exponential growth – if done well.
Expanding trust in digital systems is also essential – only 62% of those GZERO surveyed before the livestream said they had faith in tech companies protecting their data.
Challenges of building secure public infrastructure that expands participation in inclusive ways, says Priya Vora, CEO of Digital Impact Alliance, are universal, and there’s a lot more work to be done. “I don’t think any country has figured it out yet,” she says.
Digital accessibility and digitization of services, along with digital skills, government oversight, and user trust need to grow in tandem to foster greater economic growth.
Hitting the right balance of government oversight will be key to getting this all right, says Rajiv Garodia, Visa’s global head of government solutions, who works with governments around the globe on digitization. He calls for a sound economic model and infrastructures designed with operational resilience, along with clear roles and responsibilities laid out for both the public and private sectors.
Global crises, like the ongoing war in Ukraine, also present opportunities for innovation and growth. Despite its current plight, Kyiv is making strides in a key sector that’s only becoming more important.
Watch the video above to hear the experts discuss the power of digitization – both amid war and for public and private sector growth.
Designing CBDCs for success
The decision to develop a central bank digital currency, or a CBDC, must be the outcome of wide-ranging policy and technology choices. What factors are at play in designing and implementing CBDCs? Which of the G7 foundational principles should be emphasized, and where can the private sector lend valuable experience? To find out, read the latest report from the Visa Economic Empowerment Institute.
How digitization is accelerating international trade
How did the pandemic facilitate cross-border trade?
It certainly helped move things along more efficiently in two ways, Nextrade Group founder and CEO Kati Suominen says during a livestream conversation on closing the global digital gap hosted by GZERO in partnership with Visa.
First, customs agencies in many countries (finally!) went paperless — a huge help for small businesses. Second, COVID accelerated the move toward logistics tech innovations like data-driven route optimization or drone delivery that make it easier and faster to deliver stuff.
Suominen hopes that governments continue the trend and that "we continue plowing forward" on digital cross-border trade.
Adapting to a digital economy around the world
In the next decade, 70% of new value in the global economy will come from digital businesses. But more than 3.5 billion people without internet access will be cut off, and not all of them will live in the developing world.
“This is very much a global challenge,” Eurasia Group senior analyst Ali Wyne says in a livestream conversation hosted by GZERO in partnership with Visa.
Much of the developing world went digital during the pandemic. We see this, for instance: in Nepal, where it pushed people to go cashless and women in rural areas to embrace digital banking. Yet many remain unbanked, and that means they struggle to create wealth because they only deal in cash, according to Visa's Rubén Salazar. Having no bank account also makes it harder to send remittances, as we learn from a Mexican recipient and from the World Bank's Dilip Ratha.
There is hope, though. For Nextrade's Kati Suominen, digital payments are helping small businesses around the world reach new markets. The global move toward online shopping is a huge opportunity to scale, adds PayPal's Usman Ahmed.
In short, digital adoption faces many challenges but also huge opportunities to make things better for those who have the least.
Watch our recent livestream discussion on remittances and other tools for economic empowerment.
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