The discussion about taxation over VOD platforms, including so well-known Netflix, HBO and Disney + first started when Portugal transposed the new European Audiovisual Media Services Directive (“Directive”) into National Law by enacting Law no. 74/2020 (“Law 74/2020”). These platforms became subject to an obligation of either acquiring independent European productions’ rights, originally in Portuguese, remastering or single-handedly producing locally.
Other notorious platforms, such as YouTube and Facebook, as video-sharing providers, are now subject to an ad fee of 4%, the same fee movie theaters’ advertising and commercials broadcasted on TV were already subject to.
But the hot topic is VOD platforms being levied on 1% of their relevant income in the previous year, i.e. those arising from audiovisual commercial communications, or subscriptions for conditional access television operators, as well as other types of income.
Law 74/2020 does not define its own concept of “relevant income” and how it will be assessed, collected or paid. There are certain situations, however, that are specifically not included in the definition.
This made it is impossible to determine the relevant income of those who (i) do not have to report it in Portugal, but in other Member States – the elements made available in those countries do not discriminate the income by geographical origin, which does not allow the part of the income obtained in Portugal to be determined; or in cases of (ii) non-disclosure of the legal documents required to enable the correct assessment of ‘relevant income’.
In this short article, we will analyze the challenges resulting from the non-determination of this concept and the effectiveness of charging streaming services this way.
First, is this charge legal?
It should be noted that levies or charges (taxas) are based on the provision of a public service, use of a public space or removal of a legal obstacle to the individuals, which appears not to be the case.
This makes us question if this charge is, in fact, a real tax rather than a levy, since it is based, essentially, on the ability of VOD platforms to pay, through their net worth.
The creation of taxes obeys certain legal principles that appear to not have been respected when this charge was established. One of these principles is the principle of legality that determines that taxes can only be created by law, which must determine who and what is taxed, the rate, and tax benefits for taxpayers.
Since this charge does not establish specific terms for the settlement and collection of the charge, nor does it specify what “relevant income” means, it is probably going to be challenged by VOD operators.
The Directive itself does not seem to provide a definition of the object of the assessment, simply mentioning that Member States can require media service providers under their jurisdiction to contribute financially to the production of European works, by direct investment in its content and through contributions to national funds.
The vagueness of this concept in Law 74/2020 may cause many uncertainties at the time of determining the tax that is meant to be collected. For example, if the obligation is determined and based on number of subscribers, how will that number be assessed if the operator has had subscriptions interrupted during the year? A more detailed definition of the concept of "relevant income" would help avoid uncertainty in this type of situation.
VOD operators would be penalized and subject to the payment of a charge for an income that has not been obtained by them.
France and Spain, which are planning to introduce an identical charge, intend to calculate it through the turnover of streaming companies and not on the "relevant income".
This way, if the same criterion was applied in Portugal, VOD operators would have a much more realistic estimation of how much they would pay, and they would be effectively taxed for the full value of the services actually provided and not by mere assumptions.
And is this charge a reasonable solution?
We wonder if levying streaming services is the most effective way to promote Portuguese cinema as it is. Since the cinema industry is not highly demanded in the country, maybe it is not wise to increase supply exponentially without there being any demand, instead of promoting consumption first. This considering, of course, the fact that this fee penalizes VOD platforms.
It is understandable to consider whether taxing popular streaming services will significantly reduce the operators’ investment capacity, jeopardize competition within the sector in Portugal and ultimately affect the provision of these kinds of services.
Both from a Competition, Media, or Tax perspective, financially targeting streaming services providers that currently have over two million subscribers in Portugal and which could pose a unique opportunity for an organic development of the media industry within Portuguese territory, is a risky play, especially if we consider that Europe’s main economies had already overloaded digital services with taxes in those jurisdictions. For all that matters, taxing streaming services in hopes of developing local cinema is an opening move for the Portuguese digital services taxation as bold as a Queen’s Gambit in chess.
A tax wind from Spain
It all started in 2013 when Spain published Ley 15/2012, of 27 December (later amended by Law 9/2013, of 13 July), with a special tax of 7% charged to electricity producers, and the Portuguese Decree-Law no. 74/2013, of June 4 (the “Clawback Law”)) created a mechanism to correct imbalances between electricity producers, caused by distortions resulting from external events or measures taking place in other Member States of the European Union.
The Spanish energy tax has been controversial. The Spanish Supreme Court argued the illegality of this mechanism considering that this tax would not be exclusively an environmental tax, since it would tax all energy producers indiscriminately. Also, it created a possible double taxation issue with the Tax on Economic Activities that energy production was already subject to. Nevertheless, the Spanish Constitutional Court rejected this understanding and decided for the adequacy of the energy tax to the Spanish Constitution.
In 2018, the Spanish authorities decided to suspend the energy tax for six months with the purpose of reducing the electricity prices for costumers. This decision was temporary, and the energy tax was re-enacted in 2019. Again, Spanish electricity companies increased their wholesale prices. This influenced the market price at OMIE (the MIBEL daily market) and allegedly benefited the Portuguese producers integrated in the same market and were not paying the Spanish tax, thus receiving windfall profits.
Lead to a long list of regulations in Portugal
In Portugal, the Government imposed a charge on energy production (the “Clawback Charge”) of EUR 6.5/MWh, through Order no.11566-A/2015, of 3 October, that Order no. 9955/2017, would decrease to EUR 4.75/MWh. This was done under the cover of the Clawback Law, with the above argument that Portuguese producers were receiving windfall profits. Subsequently, the Portuguese Energy Secretary of State suspended the Clawback Charge in the period corresponding to the suspension of the energy tax in Spain, from 1 October 2018 until 31 March 2019.
Decree-Law no. 104/2019, of 9 August, amended the Clawback Law to allow a pre-payment to temporarily mitigate the time lag between the verification of the external event (in this case, the verification that the Spanish energy tax remains in place) and the respective compensation (i.e. the Portuguese Clawback Charge). It also allowed to adjust the external event to the electricity production technology on which it is focused, to avoid distortions of undifferentiated application to different energy production sources. Important to note that new Article 1.º-A of the Clawback Law expressly established that the clawback charges apply to electricity producers.
ERSE, the Portuguese Energy market regulator, was requested by Decree no. 282/2019, of 30 July, to submit, on a yearly basis, a report on the impact on the formation of the average price of electricity in the Portuguese wholesale market for measures and events recorded in the European Union. ERSE published its first report in September 2019, where it considered that the re-enactment of the Spanish energy tax was an event that could cause a market imbalance requiring compensation through the clawback mechanism.
As a consequence, the Clawback Charge on Portuguese producers in respect of the energy output was set at the value at EUR 6.27/MWh for 2018 and at EUR 4.18/MWh for 2019, by Order no. 8521/2019, of 26 September.
The pre-payment for 2020 was adjusted to EUR 2.24/MWh by Order no. 6740/2020 of June 30 to internalize local events that affected the Electric National System (“SEN”) such as the taxation of petroleum products and energy; the extraordinary contribution on the energy sector and; the social tariff for electricity.
Followed by more than simples rulings and clarifications
All this complex regulatory output raised many doubts among producers, first on how the clawback mechanisms would work, as the initial version of the Clawback Law was missing the tools to calculate the amount that would charge to producers. Subsequently, on to whom would the clawback charge apply to.
The Portuguese Energy Secretary of State issued on December 16, 2019 a ruling (the “Ruling”) stating, firstly, that the triggering of the Clawback Law mechanism is limited to external events to the SEN with effects on the formation of wholesale prices in OMIE; in second place that all electricity producers selling electricity at a price by reference to OMIE, regardless of the primary source used by the respective power plants, would be covered by this regime.
On the other hand, electric producers that operate power plants with remuneration not depending directly on the MIBEL daily market are not covered by this mechanism, even if they participate in OMIE, provided that the income obtained by the respective power plants is predetermined in the respective off-taking contracts, and does not change according to the evolution of prices in the MIBEL daily market.
The same understanding should apply to power purchase agreements between electricity producers that do not benefit from any fixed remuneration mechanism and final customers/suppliers, for the physical delivery of electricity at a specific point, at a specific price, since it will not generate any windfall profit.
But if they generate any windfall profit, even though Article 1.º-A of the Clawback Law only established that this charge is to be applied to electricity producers, the Ruling extend the Clawback to electricity suppliers as well.
In an additional clarification, dated of July 27, 2020 (the Clarification”), the Portuguese Energy Secretary of State determined that in the case where the supplier acquires electricity from a producer under a fixed price PPA to sell it at OMIE, receiving the respective marginal price as return, there will be an increase in gain with the nature of a windfall profit in the sphere of the supplier, which must be subject to the Clawback Law mechanism. In these cases, the supplier should pay the Clawback Charge amount to the producer, being the latter responsible for delivering it to the REN (which, as the transport network operator, has been chosen as responsible for the collection of the Clawback Charge).
That disrupted the energy market and the trust in regulators
When it created the Clawback Charge using the Clawback Law for that purpose, the Portuguese Government (and ERSE) assumed that a variation in the Spanish taxation of energy creates an extra-market advantage in Portugal that has to be counter balanced through the Clawback Law mechanism.
This assumption is arguable, to say the least. The Clawback Law intent was to protect the electricity market by the correction distortions not originated by the market itself. But, by their nature, we cannot include in such distortions those caused by any voluntary action of the Iberian Governments, particularly if those actions take the form of a tax. The differences between the Portuguese and Spanish taxes are not eligible to be balanced by the simple clawback mechanism created by the Clawback Law: the lower VAT rates applicable in Spain, are a good example, as they have not yet caused and should not cause the Portuguese Government to provide any incentive to Portuguese energy producers to counterbalance the higher Portuguese VAT rate.
Any charge imposed upon Portuguese energy producers or suppliers to balance a new tax on energy in Spain is in substance a new tax in Portugal, a charge generally imposed by the Portuguese State on a specific type of transactions: in our case, the sale of energy when it is sold at OMIE or at an OMIE related price. In Spain there were never doubts about the tax nature of the substantially identical contribution (even if with a broader scope) that energy producers have been called to pay pursuant to the Spanish energy tax law.
Article 165.º et seq. of the Portuguese Constitution establish that all new taxes, any changes to the scope of a tax or to the tax subjects and tax rates require the enactment of a formal law from the Portuguese Parliament. Consequently, any charge created under the cover of the Clawback Law (which, by the way, is a Decree-law enacted by the Portuguese Government within its legislative powers, and not by the Parliament) that materially corresponds to a new tax, as it happens with the Clawback Charge, violates the Portuguese Constitution.
To make it worse, the Ruling and the Clarification modified the Clawback Charge and extended it to electric energy suppliers, overriding article 1.º-A of the Clawback Law, which clearly states that only the producers are subject to the clawback mechanism, with no reference to suppliers. The Ruling and the Clarification were enacted within the executive powers of the Portuguese Energy Secretary of State, adding a second layer of Constitution issues and legal problems: the Portuguese Energy Secretary of State does not have the legal power to rule on the scope and on the taxable subject of the Clawback Charge, this power belongs to the Portuguese Parliament; nor has he the power to amend a decree-law issued by the Government.
This long succession of events, that we tried to summarise in this article, lead our country to a situation where the Portuguese electricity market competitiveness is being penalised by a random tax which, one day applies only to producers and to a certain kind of transactions but the next day can apply to different transaction types and to other market agents, with variable and unforeseeable tax rates, all by decision of one member of the Government. The Clawback Charge not only undermines the creation of a market for financial PPAs in Portugal, depriving all market agents from its benefits; but it adds, at a time Portugal is putting an enormous effort to foster the national solar photovoltaic production, a high degree of concern, particularly amongst the renewables’ market players who do not know anymore what to expect from the Portuguese decision makers on the taxation of energy.
More importantly, the Clawback Charge has been put in place in a manner which, in our view, disregarded the boundaries for the protection of all taxpayers set up in the Portuguese Constitution. This, of course, creates another kind of concern being felt throughout the World these days, even in places where we still take the principle of separation of powers for granted.
Published on ECO News.
Portugal is committed to promoting the transition to the digital economy.
More than having a Ministry specifically dedicated to this topic, the Ministry of Economy and Digital Transition, Portugal recently approved the Action Plan for the Digital Transition, through the Resolution of the Council of Ministers No. 30/2020, 21st of April.
Moreover, we have an amazing broadband network, which covers the entire national territory, excellent road structures, security, and a national and universal health system that – at least so far – has been able to respond to the pandemic of Covid-19 disease. But we have more. We have a huge Atlantic coast, villages and cities in rural areas willing to receive new residents, and a World Surf Reserve (Ericeira village) that is a factor of attraction for thousands of digital nomads.
Digital nomads are mainly young (and less young) literate and with financial autonomy, who work under telework and who do so from different parts of the Globe, alternating the countries where they temporarily set themselves. This is an increasingly marked trend that has been encouraged and supported by several global companies, especially technology corporations. Unlike traditional tourism, digital nomads are based in certain countries for prolonged periods, adapting to local culture. They bring knowledge, intelligence, a new way of being, and – of course – they enhance internal consumption. They rent houses, encourage local commerce, occupy co-working spaces, and have the financial capacity to do so. They are working and have financial independence; being paid by the international companies they work for.
Ericeira is an example – at the moment, hundreds of nomads from various parts of the globe, who by force of the pandemic began to work remotely, are living and working from this surf village for different companies and countries, taking advantage of the climate, the ocean, surfing and local products. But they do so informally, without any governmental framework. I do not even know if the Portuguese Government is aware of this movement.
There are several countries that are aware of this trend and are working with professionalism to attract digital nomads.
In a recent Washington Post report, we may find that some countries have created special rules to attract digital nomads from the United States during the pandemic period.
Antigua and Barbuda, for example, launched the “Nomad Digital Residence Program“, which grants visas for up to 2 years to nomads with an income of a minimum of $50,000 USD per year. The cost of issuing this special visa amounts to $1,500 USD per person, $2,000 USD per couple and $3,000USD per family of three or more. Based on this visa, nomads can enter and leave the country as many times as they wish, on condition that they remain resident in this country and present negative tests of Covid-19 disease.
In the same vein, the small island Aruba launched in September the “One Happy Workation“, which creates a “remote work visa”. The visa lasts for 90 days and nomads must guarantee, during this period, accommodation in residences or hotels. The Government promotes packages of accommodation in condominiums or residences, equipped with Wi-Fi, common areas and associated tourist and sports programs (diving, sailing, yogga, etc).
In Europe, the first visa for digital nomads was approved in Estonia. At the height of the pandemic, Estonia launched the new Digital Nomad Visa. Under this new visa, the Government assigns residence permits up to 1 year, requiring nomads to have a monthly minimum wage of €3,000. The new visa was created in June and, according to the Estonian Government, the country has since then received thousands of visa applications from the United States, Canada, Russia, and Asia.
Also in Europe, Georgia launched in July a special program (“Remotely from Georgia“) to attract digital nomads from 95 countries, for periods equal to or greater than 180 days. To this end, they are required to have minimum monthly incomes of €2,000.
Portugal, for the time being, has done nothing in this sense, at least in a structured and integrated way.
But the country should do it.
If we see the digital transition as one of the essential tools of the country’s development strategy and if we want to be a benchmark in this topic, we must retain all those who have come to our country in recent years to attend the Web Summit.
The pandemic is an enemy of tourism and short-term travel, but it can enhance the fixation of all those who started working remotely on a global scale.
Since the focus on domestic consumption is a measure to combat the upcoming economic crisis, why not try (also) this measure?
EN-H2, the Portuguese Hydrogen National Plan
Recently, the Portuguese Government approved a National Hydrogen Plan (Plano Nacional do Hidrogénio) also known as “EN-H2”. Council of Ministers’ resolution on August 14, has set the agenda for the incorporation of hydrogen technology in different sectors and markets of the Portuguese economy.
EN-H2 is now an element of the national strategy to fight climate change and enhance the decarbonization of the economy, together with the European Green Pact, the European Commission and the Portuguese Energy and National Plan for the Climate (Plano Nacional de Energia e Clima - “PNEC”).
PNEC had already established the following goals for 2030: (i) reduction of the greenhouse gases’ emissions up to 55% (compared to 2005), (ii) increase of energy efficiency by 35%, (iii) increase of renewables’ weight in energy consumption up to 47%, and (iv) increase the number of green vehicles to 20% of total vehicles.
Portugal remains very dependent on imports, even though energy dependence has reduced in the last decades (from 88,8% in 2005 to 77,9% in 2018) as a result of the investments made in renewables, mostly wind and solar plants.
With EN-H2, hydrogen will help reaching the PNEC goals and to correct the current Portuguese energy deficit: it is expected it may lead to a reduction in natural gas imports from 300 to 600 million euros. At the same time, it will promote energy transition and sustainable mobility.
It appears that the moment could not be better. The Portuguese Government has announced that of the assistance from the European Union, 2.7 billion euros will be allocated to climate transition, of which 800 million euros will be used to fund the hydrogen strategy.
The green hydrogen value chain
The production of green hydrogen, which is hydrogen produced by water electrolysis using exclusively renewable energies is the main focus of EN-H2, establishing a hydrogen value chain, is composed of three phases:
(i) Production;
(ii) Storage, distribution, supply; and
(iii) End-use.
Production can be carried out in a large scale (centralized) or in a small scale (decentralized). Although EN-H2 fosters and encourages hydrogen production through a combination of industrial scale centralized projects, and decentralized processes closer to consumption sites, massive investments in infrastructures are being made in centralized production at the Projeto Industrial de Sines or “Sines Project” (see below).
Hydrogen distribution is made by road and sea transport. Hydrogen can also be injected into the current natural gas distribution grid, used for both industrial and domestic purposes. Hydrogen fueling process can take several combinations, namely:
(i) Hydrogen distribution by road in the form of liquefied/compressed gas, ending with a liquid to liquid (L2L) refueling process for liquid to gaseous cryogenic hydrogen (L2G) and gas to gas (G2G) storage systems at various scales;
(ii) Hydrogen distribution by vessels in the form of liquid hydrogen, including delivery for end-use with pipelines and road transport;
(iii) Hydrogen gas distribution through a pipeline system; or
(iv) Hydrogen mixture with natural gas in the current natural gas infrastructure.
Since hydrogen can be transformed into electricity or synthetic fuels, which can then be used for domestic, commercial, industrial or mobility purposes, its end-use is vast and covers a significant part of our day-to-day energy consumption.
One of the downsides of green hydrogen production is its high cost. Naturally, a small-scale production will be more costly and therefore less attractive to investors. Notwithstanding, it is expected that as decarbonization progresses, generating energy from renewable sources will be cheaper, making it less expensive to obtain green hydrogen.
As smaller energy storage projects are just in their early stage in Portugal, there is no clear evidence that hydrogen can compete with other technologies.
In the Portuguese solar auction that took place on 31 August 2020, energy storage was part of eight of the 12 awarded projects. Still, hydrogen will not be used in those projects, but lithium batteries which appear to remain the reference in energy storage.
Maybe in the future hydrogen will replace lithium batteries but the Portuguese Government is supporting the opening of new lithium extraction fields and is currently working on the creation and development of the first lithium refinery in Europe.
For those reasons, decentralized projects will face the cost-efficiency challenge against other technologies that may delay their development, unless there is proper support to such investments, which, until this moment, does not seem to be the case in Portugal.
The Green Flamingo project
The Sines Project, also called “Green Flamingo”, is a 3,5 billion Euro industrial-scale project for the production of green hydrogen that involves the main Portuguese energy stakeholders, such as GALP, EDP and REN. It is focused on leveraging solar and wind energy as competitiveness factors and on industrial transformation and expects to have a 1 GW of capacity production until 2030, fully supported by green sources.
Sines benefits from its natural resources, such as its coastal location - which is a critical point regarding exportation, the deep-water port and access points to the natural gas distribution grid. In addition, the city already has qualified manpower and infrastructures that make it a competitive location for the installation of an industrial-scale green hydrogen production project.
The hydrogen generated in Sines will initially be consumed in the national market, using mainly the natural gas distribution grid. It is expected that, as the production capacity increases, a significant part of the production shall be exported using the deep-water port of Sines. The Dutch and Portuguese Governments are currently negotiating a Memorandum of Understanding for this purpose.
On 18 June 2020, the Portuguese Government launched a market consultation on the Sines Project and received answers from 74 entities, for investments valued in 16 billion Euro (equivalent to 7,5% of the national GDP). On 27 July, of the 74 projects, 37 representing an investment of nine billion Euro were selected by the Admission Committee and are now eligible for the PO SEUR - Operational Programme for Sustainability and Efficient Use of Resources, PO SEUR is a Portuguese Government’s incentive program to transform the national energy system to meet the sustainability requirements of EN-H2.
The Sines Project has potential to be considered by the European Commission as an Important Project of Common Interest (IPCEI) due to its size or scope and its very considerable technological financial risk. For that it must meet a number of criteria such as making a concrete contribution to the achievements of one or more of the Union’s objectives or having a significant impact on the Union’s competitiveness.
The Sines Project being classified as an IPCEI, the Portuguese Government and investors will most likely benefit from European funds of up to 100% of eligible expenditure, it also enables the accumulation of various sources of funding and establishes an EU platform to support long-term cooperation between regions, clusters and industry.
EN-H2, despite heterogeneous, is clearly privileging the Sines Project over decentralized projects. Therefore, opportunities for investors are expected to arise mainly in the Sines Project, which may include easy access to credit, public investment in the grid and other infrastructures.
Published on ECONEWS.
The holiday period is always a window of opportunity to escape the banality and seek literary perspectives that fictionalize the future and that rarely may be read in our daily work year.
The Jungle Grows Back, by Robert Kagan, has this potential. It is a book that contains a global geopolitical analysis and which – unfortunately – recalls that the period of peace that has been going on in Europe since the end of World War II is a mere historical dust and not for certain.
In this work, the author analyzes the change that is taking place in the world order and underlines the (real) risk of bankruptcy of liberal democracies and world peace.
The analysis is simple and enlightening.
Liberal democracies are based on individual freedoms. Freedom of thought, expression and association and economic freedom. They are sustained in the Rule of Law and follow the values of tolerance, equality and inclusion, as well as in the separation between the State and religion. Liberal democracies are in the antipodes of totalitarian and autocratic regimes, which subjugate individual freedom in the name of an alleged collective interest. They also distance themselves from religious states, in which State and Religion are merged
What varies in Western democracies is not the primacy of the person and the defense of his self-determination. What varies is just the model of Social State. In the Anglo-Saxon model, the Social State is minimal; in the Scandinavian model, it is maximum; in countries in Southern Europe, is at half-term.
The preservation of liberal democracies rests, above all, on the radiating force of their values and in the promotion of the common good.
But not only.
Liberal democracies have also depended on the communion of values between Europe and the United States of America (USA), a country that since World War II has always been present in the defense of this way of life. In a first phase, the US was decisive to the defeat of Nazi Germany; during the “cold war”, was on the front line against the Soviet model; more recently, after the fall of the Berlin Wall, the US helped containing religious movements with military pretensions, such as that of Daesh.
This road is running out.
The philosophy of “America First” and the exaltation of isolationism leave Europe isolated. The previously touted “Atlantic Community“, based on a democratic order between the US and Western Europe, was virtually set aside by the current American Presidency, which questions the previous world order. Europe is no longer seen as a partner, but instead as a competitor.
This new status quo, along with Brexit and the growth of nationalist movements, leaves the European Union isolated and at the mercy of two giants who do not follow our model and who have (both) expansionist ambitions: China and Russia.
It is in this context that the pandemic crisis, due to the economic and social repercussions, must be fought by the European Union without hesitation, through the preservation of jobs and the European model of life.
A possible failure in this area would have catastrophic effects. It would promote distrust in the regime, strengthen nationalist movements and would pertain liberal democracies. In Portugal, the preservation of business, employment and income is crucial. And the increase of the minimum wage is a sign of hope and sustainability of the regime, especially if it results from an agreement that bring together employers, employees, and the Government. But we must go further. Elites and big companies should voluntarily collaborate in combating the crisis, under their social responsibility, by promoting a greater distribution of wealth and betting on the employment of young people.
The garden of democracy is fragile and must be preserved.
And the jungle is just around the corner.
Published on Eco News.
The digital revolution, automation and artificial intelligence have the potential to profoundly change the labor market.
Not only will the Taylorist model of work is dead, but the contractual type on which the employment relationship is based tends to be distorted.
The increase in information and communication technologies, along with the use of algorithms in the selection of workers, data processing on a scale never seen before and the massification of remote work, will bring new ways of providing work, new (un)balances, new challenges in reconciling work and family life, as well as new issues in the right to privacy, the limitation of working time and the right to disconnection. On the other hand, the increase of informal workers, the work provided on collaborative platforms and the distortion of the traditional employment contract, can jeopardize social protection and the sustainability of social security.
To face this challenges, there are two possible paths: the first, is to do nothing, to believe in the market and its “invisible hand” and to follow a Hayekian line, according to which freedom of business management and economic agents will find, alone, the best way for these new questions, without the interference of the State. The second, more Keynesian, is based on regulation – since it is a theme that can break with the social model we know, enhance unemployment, bring social conflict and threatens the pillars of liberal democracies, it is important to regulate, prevent and act, in order to avoid unpleasant surprises.
The famous conflict of two great economic schools, which pitted Hayeck and Keynes in the aftermath of World War II, sublimely described in the work of Nicholas Wapshott, seems to be in force again, this time regarding the future of work.
It is true that the theme is recurrent. The idea that machines are going to steal our jobs is old. Since industrialization and the end of the 18th century, countless economists have warned about the threat of massive machine use, which can make human labor superfluous. The truth, however, is that since then societies have always fostered, reaching a level of satisfaction and sophistication that have altered our standard of living. In general, at least in Western countries, innovation and technology have increased our standard of living; life expectancy has increased; public health systems have become universal; and social security has created an equally universal system of protection in old age, sickness and unemployment. The machines destroyed some jobs, it is undeniable, but the balance was positive: technology increased labor productivity, brought competitiveness, extended consumers’ freedom of choice and opened doors to new opportunities, which once existed only in the field of science fiction
This time, however, the disruption may be more intense.
It is not just a question of introducing technology and automation into existing models. What’s at stake right now is more than that. It is a change in the model of social contract that has brought us a long period of peace and prosperity since the end of World War II. What is at stake this time is the increase of inequalities, the implosion of permanent employment contracts and their replacement with a new working model, based on flexibility, intermittency, and the absence of working relationships between those who work and those who hire.
For this reason, several international organizations, including the European Union, the International Labor Organization and the OECD, have warned of the need for society to jointly prepare the future of work, promoting social dialogue between governments, employers and workers.
It is in this context, therefore, that several countries have studied the theme and promoted the publication of a Green Paper on the Future of Work, as is the case of Green Paper Work 4.0, prepared by the German Ministry of Labor.
On the eve of assuming the Presidency of the European Union, and in order to be at the forefront of this movement, the Portuguese Government also started preparing its own Green Paper, and I have the privilege of being one of the scientific coordinators of it, along with my colleague, Prof. Teresa Coelho Moreira.
The making decision process will be based on listening sessions with all: academics, thinkers, civil society, NGOs, employers’ associations and trade unions.
The goal is clear: by the end of 2020, guidelines should be set up to prepare the country for the challenges of the future in the labor market.
Above all, we´ll try to reach a fair balance be struck between modernity, technology and flexibility, on the one hand, and the existence of decent, secure and healthy works, on the other.
Published on ECO News.
The State of California is known for its gorgeous landscapes, the Golden State Warriors and its entrepreneurial, innovative and progressive spirit. Silicon Valley is the heart of the largest technology companies and several startups. And it is in California that we may find some of the best American universities, like Stanford or Berkeley.
The Golden State is an incubator of dreams and good ideas, which tend to make a difference.
The recent approval in this State of the Bill AB5 is also a milestone in the configuration of employment. The AB5 has the potential to mark the future on a global scale.
The qualification as an employee is one of the most striking topics today. Worldwide, labor laws use to guarantee workers a floor of rights that protect them – minimum wages, limitation of working hours, right to paid holidays, parental leave, protection against accidents at work, prohibition against unfair dismissals arbitrary, as well as sickness assistance.
The protection given to the employee is significant, leading to the inherent operating costs for companies.
For this reason, the 21st century has been marked by an attempt to escape the employment contract by several companies, which choose to hire independent contractors instead. This option, which provides less protection for those who work, affects the sustainability of Social Security and is also questionable in terms of concurrence, as it puts companies that offer good working conditions side by side with others that escape this regime in search of lower costs and competitive unfair advantages.
The issue is particularly impressive regarding the use of collaborative platforms and in the so-called gig economy, in which companies position themselves as mere technological intermediaries between the end customer and the independent contractor, who is no longer qualified as a worker.
Bill AB5 aims to combat this phenomenon.
Based on the case of Dynamex Inc., vs. Charles Lee, the law defined what the employer has to prove in order to dismiss a presumption of employment contract and demonstrate that the provider is really independent. What matters, is to consider the substance of things and the way work is actually done.
To do this, the company will have to comply with the “ABC” test, that is, prove that: (A) The provider is free from the control and direction of the hiring entity in connection with the performance of the work; (B) The person performs work that is outside the usual course of the hiring entity´s business; (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
If the company fails to prove these three points, it does not pass the test and the provider will be qualified as an employee and not as a service an independent contractor, even if there is a written contract saying the contrary.
That was the solution reached in that case, in which the transport company Dynamex had chosen to stop having workers and to hire only “independent” drivers. As the company was unable to pass that test, the drivers were qualified as employees, despite the contracts saying they were independent.
Thus, Bill AB5 threatens the business models of companies such as Uber, Cabify and others, which center their activity based on independent contractors.
The “ABC” test promises to revolutionize worldwide the way courts come to recognize the existence of employment contracts. In addition to the legal tests that are already been used by the Department of Labor and the National Labor Relations Board, this test becomes the new gauge for the courts to decide.
The idea is clear: entrepreneurship is good and makes the world move, but the defense of employment is also an investment in quality, in the future of the community and in the people who work.
The Californian dream is a possible dream: it combines modernity and innovation along with the protection of employment and the community.
The mainstream interest in the topic grew with popularity of blockchain technology and cryptocurrencies. Interest, however, often leads to misconceptions and, as regards to smart contracts, it contributed to make a sweeping assumption that smart contracts are more than code that reads and writes on a blockchain.
The mainstream interest in the topic grew with popularity of blockchain technology and cryptocurrencies. Interest, however, often leads to misconceptions and, as regards to smart contracts, it contributed to make a sweeping assumption that smart contracts are more than code that reads and writes on a blockchain.
Distributed ledger technologies, and blockchain specifically, are as worthy to the provision of a service as the efficiencies – in number or quality – they offer to the provision of such service. Smart contracts are as useful as the simplicity that they bring to the table.
Opposing a sizeable optimism on the applicability of smart contracts blindly to all industries and services, the relevance of the vulnerabilities of smart contracts is of greater importance than its potential use cases.
Language and trust are two major issues: on the one hand, the language (or semantics) of code is formal and is therefore unable to replicate the flexibility of natural language; on the other, for certain transactions, the use of smart contracts must necessarily trust external sources, which poisons their decentralized and trustless character.
The rigidity of code language is a limitation, as binary code is unable to make a fair judgement on ambiguous terms, those to which one cannot regress into binary code, 0s and 1s, or logic gates, ifs and thens. If we take a contract for a repair service, for example, the performance of the service consists of the repair against a payment agreed between the parties. While the performance or non-performance of the payment obligation is ascertained in a logic gate of yes or no and then, the good performance of the repair requires social ontology elements that code cannot reach.
In general, smart contracts and blockchain technology enable a trustless environment. It is not that trust is missing, it is just that trusting a third party is not necessary, which is very relevant in the case where one eliminates intermediaries. This is true for on-chain transactions, such as a Bitcoin transfer of funds, because data on the Bitcoin price, account addresses, signatures, etc. is already on-chain. This is not the case, however, with off-chain transactions, because regardless of the security, immutability and disintermediation that the smart contract and blockchain technology provide, the data is provided from outside of such a trustless environment.
An optimist will find infinite use cases for smart contracts because he finds them alternative to traditional contracts. A realist understands that the utility of smart contracts lies where (i) transactions are on-chain and they do not require the flexibility of natural language, and (ii) transactions are off-chain, they do not require the flexibility of natural language, and, in addition, they trust – or they do not need to trust – external sources.
Published on ECO News.
The Supreme Court of the U.S. reaffirmed the civil rights doctrine.
Last week, on the leftover of the George Floyd crisis, in the case of Bostock v. Clayton County, the Supreme Court ruled that when Title VII of the Civil Rights Act of 1964 outlaws discrimination based on “sex” it also covers sexual orientation and transgender status.
In other words, it is clear from now on that no one can be discriminated at the employment based on their sexual orientation or because they are transgender. An employer who fires an individual merely for being homosexual or transgender violates Title VII of the Civil Rights Act.
The decision in question had been embraced by two out of the three circuit courts below, so the result should not have been a surprise. In this case, however, the amazement exists because the most conservative judges – notably, the newly appointed Brett Kavanaugh –voted in favor of the civil rights of LGTB workers and jobseekers.
Despite the racial crisis that erupted about two weeks ago with the murder of George Floyd, and which exposed racial tensions existing in the US, the truth is that both academic society and American jurisprudence have been particularly vibrant and progressive in affirming civil rights, enacting precedents which have been judicially influencing other countries, particularly in Europe.
The idea of tolerance, multiculturalism and pluralism, whether related to racial origin, gender, sexual orientation, or religion, has been defended since the last quarter of the 20th century as a necessary instrument for United States development, a country strongly characterized by demographic and ethnic diversity, and immigration.
We owe the Americans, after the Civil Rights Act of 1964, the concepts of disparate impact, affirmative actions, as well as the application of anti-discriminatory rules, not only in the performance of work, but also in the access to employment.
The latest decision comes to reinforce the progressive path of this high court, since the leadership of Chief Justice, Earl Warren (1953 – 1969).
Earl Warren was responsible for the commonly known “New Deal Court“, which boost several civil rights, repealing the doctrine “separate but equal”, grounded on the famous judgment Brown vs. Board of Education (1954), which was a landmark on the fight against segregation. Under the leadership of Earl Warren, the Supreme Court also spread the idea that the American Constitution is a living text that and must be constantly adapted to the changes that happen in society, to foster citizenship.
The recent decision of the Supreme Court reinforces something that is not always recalled: the role played by the United States of America institutions and liberal democracies in affirming the principle of equality.
It may seem paradoxical, but it is not: it is precisely in societies with larger racial problems, in historical terms, but with strong institutions with technically well-qualified professionals, where one can find scientific advances and winds of change in the affirmation of equality and non-discrimination.
The struggle for equal rights is part of the United States’ history. From the 1776 Declaration of Independence to the 1964 Civil Rights Act, the path taken was always progressive and evolutionary, so much so that it can be said that equality and non-discrimination, on one hand, and social mobility, on the other hand, are part of the American Way of Life and the American Dream.
This is the legacy of, among others, Abraham Lincoln, Franklin D. Roosevelt, Martin Luther King and John F Kennedy, for whom freedom, equality, pioneering, free development of personality, diversity and multiculturalism were – and are – the key to progress and the consolidation of democracies.
At the very moment when American society was heavily shaken by the violence associated with the murder of George Floyd, the Supreme Court indorsed the superior quality of its doctrine and its judges, echoing that all people shall be free and treated with respect and dignity, and without violence, so they can pursue their happiness.
It is time to recall it.
The global economic crisis, spurred by the coronavirus, has caused carbon dioxide emissions to fall this year for the first time since the 2009 financial crisis, with the world emitting less than one million tons of carbon dioxide a day.
The decrease in the demand for oil, has led to falling prices and a decrease in production, with the demand in April estimated to have drop down to a level last recorded in 1995. In addition, Europe is facing a record in electricity prices, with power prices turning negative in many European countries (MIBEL faced a 32% reduction in the wholesale electricity market price compared to the beginning of the year). Together with the current lack of liquidity in the market, these two factors may seriously jeopardize the investment in green energy and the development of renewable electricity projects in pipeline.
In Portugal, one of the main measures adopted to reduce the impact caused by Covid-19 in the ongoing projects, was Portuguese energy authority’s (DGEG) Order no. 27/2020, subsequently amended by Order no. 33/2020, (The “Order”) providing for the suspension of all administrative deadlines in the electricity sector from 16 March to 1 June, and the extension of such deadlines while the suspension is in force.
This measure comprises all deadlines for the performance of all actions and formalities by the promoters awarded on the first Portuguese solar auction in June 2019 for the attribution of injection capacity, as well as the relevant deadlines regarding to the allocation of reserve power injection capacity.
In addition, the Order has also provided for the suspension of the submission on new applications, from 21 March to the end of May, for the award of:
- Reserve Capacity Titles;
- Agreements for the awarding of reception capacity in the Public Service Electricity Grid;
- Registrations for small production units or production units for self-consumption;
- Energy production licenses under the ordinary scheme, cogeneration and special scheme;
Establishment licenses for grid infrastructures (lines and branches, transformer stations and substations, except for those of public or private interest covered by situations considered as emergencies by DGEG, under grounds of public health or other similar reasons).
The Portuguese Government has also allowed the issuance of provisional certificates instead of the operation certificates for small production units during the state of emergency. This decision applied to a total of 220 projects for small renewable production units, for total of 30 MW.
All ongoing projects implementation was based on the assumption of an economic, social and financial stability context. Thus, projects that are already at a more advanced stage of development, namely with the construction and financing agreements already closed and signed, are more likely to succeed. In turn, projects where this is not the case, are likely to face serious difficulties, as the liquidity shortage in the financial market will probably cause an impact in relation thereto.
In spite of the negative views for renewables caused by Covid-19 pandemic outbreak, the investment in green energy may become an opportunity and a solution for affected countries to recover from the current crisis. In this regard, the Portuguese Government has committed to reduce the greenhouse gas emissions by 45% to 55% in 2030 and to reach a goal of a net zero carbon footprint by 2050.
The National Energy and Climate Plan for the period 2021-2030 (PNEC 2030), recently approved by the Portuguese Council of Ministers, sets high investment targets in renewable energy:
(i) Plus 15GW in the next decade. Solar capacity will double, promoted through capacity auctions (with the next auction scheduled for August with 700 MW of capacity to be allocated) and the investment in the production; and
(ii) The incorporation of renewable gases, such as hydrogen, as one of the main driving forces for the country to achieve the above green benchmarks. In particular with regard to hydrogen, Portugal intends to position itself as a pioneer in the development of this technology, aiming to establish support measures for hydrogen production projects and subsequently achieve a quota of 5% in the road transport consumption and between 50 to 100 supply stations in 2030.
The Portuguese Government intends to mobilize 4.5 billion euros on the above and in other green sustainability projects through strong public investment, but also with the engagement of the private sector. This "public investment shock", as called by the Portuguese Government, will be made through tax reforms, subsidies, transfers and increased public investment in sectors or strategic projects. Over the next years, Portugal may also benefit from an amount of circa 80 million euros under the Fair Transition Fund established by the European Commission to support the decommissioning of polluting industries and the decarbonization of regions dependent on fossil fuels.
The impact of Covid-19 in the energy sector is difficult to predict, but it is clear that the demand for energy resources has decreased, prices have fallen and the market is struggling to obtain liquidity. Portugal is engaged in fighting back, investing in green energy and establishing conditions to attract investment We believe that this may be the right way to economic recovery we need to put behind the economic effects of Covid-19.