In our series on the Dutch digital economy we have analysed the Dutch B2C, B2B and C2C segments. While these are the largest single online transaction segments there are other combinations possible as we can see from the table below. But do these other segments exist only theoretically or are they just small for the moment but hold a certain if not great future?
In the table above the provider of the service or product is situated in the left column, the consuming party in the top row.
Let’s start with finding out more about government as the third e-commerce party and its potential for e-commerce transactions with consumers, businesses and other governments. For our purpose the government sector embodies all layers of government in a country including central, regional and local government as well as authorities appointed by government that carry out specific societal tasks.
In order to make an estimate of the transaction value of government e-commerce we need to know the value of government purchased and sold goods and services. The Central Bureau of Statistics (CBS) states that in 2014 government income and spending amounted to €291 billion respectively €306 billion. However this government spending number also includes salaries for government employees and social security payments, other financial payments such as rent and long term investments. What remains in terms of goods and services purchased in 2014 was €43 billion. From our previous analysis on the Dutch digital economy we have learned that the total value of purchased goods and services in 2014 amounted to € 1152 billion : € 858 billion and € 294 billion by respectively businesses and consumers. If government’s e-commerce share equals that of the business sector (8%) the total government e-commerce value would amount to €3.4 billion; not an earth shattering number compared to the total B2C, B2B and C2C e-commerce transaction value of € 102 billion.
Is there also opportunity for C2G e-commerce? In other words is it conceivable that consumers/citizens would sell goods and services to the government? Yes, there is but the citizen – government relationship is very much unidirectional making the range of goods or services that government would like to purchase from consumers/citizens small. There are of course payments by the government for wrong verdicts, doing harm or damages etc. But even more than in the case of taxes it is doubtful if we should name them services; it is just a financial transaction for a disservice.
G2B and G2C
Our B2G e-commerce transaction value estimate of €3.4 billion only counts goods and services purchased by government not the goods and services provided by government. The issue with government provided e-commerce, however, is that it produces services that are not counted under the purchased goods and products of consumers, businesses and government. Yet providing services such as education, travel documents, a defense system, roads, security, water works, legal infrastructure are collective goods and services provided to society and paid for by society through taxes: indirect through VAT, direct through income and corporate tax. In fact, the payment of government taxes can also be regarded as a transaction if we allow collective goods to be part of our economy. But is it e-commerce? Citizens have no choice in purchasing collective goods provided by government but are nevertheless paying for it through direct and indirect taxes, excises and fees. So there are transactions but there is no choice and only one provider which means that in most cases companies and citizens can’t opt out. We should therefore call it the government’s digital transaction potential instead of e-commerce potential.
The governments digital transaction potential is substantial as most of the tax system is eligible for electronic transformation. As the total taxes generated by the government amounted to € 148 billion, going e-tax all the way would increase the total addressable government ‘market’ to over €150 billion a year. And just like in Sweden, the Dutch tax authority is transitioning towards an automated personal income tax process by making it mandatory for all institutions and employers to deliver the necessary data they have on the individual taxpayer.
Finally, like C2C and B2B there is also a G2G segment. In G2G transactions we are looking at services provided by one government as input for other governments. Usually these G2G transactions involve the sharing of information between government departments or between local and central government. Electronic access initiatives are mostly geared towards improving communication, data access and government efficiency. However, there are no payments made for G2G goods and services by the consuming government party and as such we do not think G2G transactions will add substantially to the total addressable digital government market.
All in all the largest digital government transaction opportunity is with B2G, G2C and G2B. If tax systems would become completely electronic, the Dutch digital transaction volume would increase by €150 billion making the government the single largest e-transaction segment in our economy.
Next time: other forms of e-transactions: B2B2C, C2B and M2M.