As the coronavirus deficit soars into the trillions, a tax plan targeting the likes of Amazon and Apple gains steam
As governments reel from cost of the coronavirus pandemic—$10 trillion and counting—some top economists and tax activists are zeroing in on the accounting acrobatics of giants like Amazon and Apple, which they say have skirted billions in taxes for years, and whose rocketing profits could now help pay for the deepest downturn in generations.
“The pandemic ironically has helped the very companies that have been the tax avoiders: The Internet companies,” Columbia University economics professor Joseph Stiglitz, a Nobel laureate, told reporters on a Zoom call on Monday, as he and other economists published proposals for sweeping new global tax measures. “The 2008 crisis made us aware of the tax avoidance of the multinationals,” Stiglitz said. Compared to that recession, he said, “This is 100 times worse.”
The report, published by the International Commission for the Reform of International Corporate Taxation, an independent group of top economists, argues for a global minimum corporate tax rate of 25%, as well as proposing that the super-rich pay more taxes in the countries where they live. The minimum corporate tax, they say, would halt the practice of companies funneling revenues into low-tax jurisdictions, like Ireland and Luxembourg, through a set of complex financial maneuvers.
The group’s proposals are hardly new—but the scale of crisis surely is. And so, the group has seized on the pandemic as a rare chance to gain traction for their ideas, at a time when governments face ballooning debt, and when there is rising popular anger over inequality and unfairness—including in the Black Lives Matter protests. All that, they sense, could provide unusual impetus to finally reform the world’s tax system.
“The view that nobody will have to pay for anything, which some politicians are trying to push, is simply not credible,” French economist Thomas Piketty said on the Zoom call on Monday. “A more equitable tax system will have to be part of the solution.” The current system, he said, “is not only immoral but also unsustainable.”
A decade in the making
If the economists’ hunch is correct, the downturn could potentially break years of deadlock over how to tax digital companies. Those efforts have sputtered on and off since 2011 in countless rounds of talks, overseen by the Paris-based Organization for Economic Cooperation and Development, or OECD. The meetings have continued even through months of lockdowns. A weeklong marathon of Zoom meetings began on Monday, with 25 members of the steering committee for the tax group logging on to talks overseen by the OECD, as they attempt to nudge forward a global agreement. The meetings are scheduled to last until Friday.
While years of negotiations have ground on, the companies have grown to become the world’s biggest corporations in history, with revenues far outstripping the GDP of some smaller countries.
Take Amazon, for example, whose market cap was just $197 billion in June 2015. Five years on, is market cap is now about $1.26 trillion—about $260 billion more than it was barely five months ago. Revenues have soared as billions of people, under lockdown and working from home, have taken to ordering a raft of items online.
“The fact that companies are making money from people stuck under lockdown, and experiencing grave inequalities, and the fact that those companies are not paying taxes, all that is making people really angry,” Alex Cobham, chief executive of the Tax Justice Network, an activist organization in London, told Fortune. “There is a broad political shift that we are seeing.”
That tone of annoyance is heard far beyond the activists. France’s Economy Minister Bruno Le Maire told the French Senate last week that his country would push through a tax on tech giants by the end of this year, no matter whether the OECD process results in a global agreement.
The French measure, nicknamed the “GAFA tax,” for Google, Apple, Facebook and Amazon, is among about 20 national digital taxes which countries are planning to introduce, having grown tired of waiting for an international agreement. Le Maire told senators that the U.S. Administration was “the last state that is blocking an agreement on digital taxation at the OECD.”
Indeed, President Trump has vowed to impose $2.4 billion in tariffs on French cheeses, wine, and luxury goods if Le Maire follows through on his promise. “We will announce substantial reciprocal action on [French President Emmanuel] Macron’s foolishness,” Trump tweeted last July, when the French government first announced its digital tax plan. “American wine is better than French wine!” the teetotaler U.S. president added. The French government backed off, delaying the plan until the end of 2020, saying it was waiting for a global agreement at the OECD.
But Trump’s threats have not swayed the opinion of regular Europeans. “They clearly see that tech giants make a lot of money in every country in the world where they do not pay taxes,” Daniela Ordonez, chief economist in Paris for the global forecasting company Oxford Economics, told Fortune.
Even so, she says that since the Internet giants are American, “it is easier for Europeans to have these opinions,” she says. “If Europe created a company like Apple or Google, the dialogue would be different.”