•ActionAid is one of a number of organisations calling for meaningful reform of international corporate taxation that would ensure companies’ taxes reflect their real economic presence, and for introducing a minimum corporate tax rate to help fight the problem of tax havens.
•ActionAid’s new research finds that G7 countries alone are potentially missing out on US$20 billion in tax revenue from just five of Silicon Valley’s tech giants.
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New research from ActionAid International shows that G20 countries are facing a potential gap of US$32bn in annual tax revenue from just five of the world’s largest tech companies.
The study comes as G20 leaders meet on May 21 for an extraordinary health summit to tackle the Covid-19 pandemic.
One year’s tax bill from these five companies could have paid for full two-dose Covid vaccination for every human on earth, says the study, titled, Mission Recovery: How Big Tech’s Tax Bill could kickstart a fairer economy.
Tech giants Amazon, Apple, Facebook, Microsoft and Alphabet Inc have extensive market activity across the world and have racked up billions in profits during the pandemic. If global corporate tax systems were fair, governments could increase their tax revenue and fund better health systems to end the pandemic and start the recovery.
Julia Sánchez, Secretary General of ActionAid International, said: “People are increasingly outraged at the gross excesses in the global digital economy, which have been exposed as the Covid-19 pandemic exacerbated the deadly inequalities in our economy and health systems.
"As public services fall apart and the world faces a vaccine apartheid, tech giants and their owners rack up billions in profits because the present global tax system enables them to avoid paying their fair share.”
G7 leaders of the world’s richest democracies will meet in June at the first in-person summit since the pandemic began. US President Joe Biden will arrive in the UK having recently supported the need for a global minimum rate of corporate tax, just one idea for tax reform which could address the conundrum of how to fairly tax the digital economy.
ActionAid’s new research finds that G7 countries alone are potentially missing out on US$20 billion in tax revenue from just five of Silicon Valley’s tech giants.
Taxing Amazon, Apple, Facebook, Alphabet and Microsoft fairly on their 2020 profits could potentially generate:
- US$32bn for G20 countries.
- US$28bn for the OECD countries.
- US$21bn for G7 countries.
- US$8bn for the EU27.
Tax revenue from tech giants with economic presence in the global south is even more crucial for much needed investment in public services, such as health care and education, which have been decimated by the pandemic.
Nigeria, for instance, could raise an additional US$100 million in taxes from these same five companies if taxed fairly, enough to pay the annual salaries of 70,000 nurses.
On the other hand, Bangladesh could raise a potential US$49.3m in taxes, enough to pay for 12,800 nurses.
Many big tech companies have actively worked to pay as little tax as they can, stretching laws and regulations to their limit to do so. In 2016, the European Commission concluded that Apple had used complicated corporate structures in Ireland to make €110bn worth of sales ‘stateless’ for tax purposes, meaning no country had the right to tax that income. Apple’s effective tax rate in the EU in some years dropped to as low as 0.05 per cent according to the European Commission.
Meanwhile, Amazon has reportedly used a web of tax haven companies to minimise their tax liabilities while in 2020 the US tax authorities sued Facebook for US$9bn in unpaid taxes based on the way the company shifted profits around the world to minimise tax bills.
The ongoing Covid-19 crisis has highlighted the need for additional public funds. In fact, our research shows that the potential tax losses in G7 countries could have paid for tens of thousands of additional key public sector workers in those countries.
The pandemic and economic crisis have hit frontline public workers and those with low job security – predominantly women – particularly hard. The temporary or long-term closure of schools in up to 192 countries placed additional care burdens on women around the world, while previous ActionAid research found girls less likely than boys to ever return to school, owing to domestic pressures, child labour, early marriage or early pregnancy.
During the Covid-19 crisis, inequality has also widened, with those profiting from the digital economy drastically increasing their wealth. According to the Forbes’ billionaire list for 2021, the top ten richest people in the world are all men and half of them have made their fortunes primarily from the big tech companies covered by this briefing.
Sanchez added: “Women and young people are paying the price for a system that has allowed corporate giants to mine and sell people’s data, insidiously influence our habits and create new billionaires, whilst contributing little or nothing towards public services in the countries where they earn their profits.
ActionAid’s new research exposes this injustice and world leaders have the opportunity now to make this right. Taxing tech giants fairly should be a no brainer: $32 billion a year in lost tax revenue in just 20 countries could go a long way: it’s enough to pay for two vaccine doses for every human on earth.”
The non-profit explained that $32 billion is enough to cover the costs of procuring the vaccine according to data from the World Health Organization on the average cost of a Covid-19 vaccination ($1.66 per shot) and the average cost of a two-shot vaccination course for a person ($3.70 per shot, allowing for administration and wastage). These figures are used to estimate the number of Covid vaccinations and courses of vaccinations that could be purchased with the avoided tax.
ActionAid is one of a number of organisations calling for meaningful reform of international corporate taxation that would ensure companies’ taxes reflect their real economic presence, and for introducing a minimum corporate tax rate to help fight the problem of tax havens.
ActionAid’s new research shows that billions are at stake in the long overdue reform of international corporate taxation – enough to transform underfunded health and education systems across the globe. In the absence of a global deal on tax, countries must consider unilateral measures to tax these companies on their profits or their transactions.