The Coronavirus pandemic makes it more essential than ever that big tech pays its taxes

With essential services and safety nets struggling thanks in part to years of austerity and the more recent pandemic, it's time for big tech to step up and pay its dues, argues Stuart Sumner

Five thousand years ago the rulers of Ancient Egypt hit upon a neat idea. If peasants could be made to give around a fifth of their crops to the state, the country would have a defence against famine, and something to trade with surrounding nations. Those too poor to give crops would instead donate some of their labour.

Millennia later governments still tax their people, but the rules have become rather more obtuse, even more so in the internet age.

Pre-internet, if you sold something in a country, you could expect that country to ask for a portion of that revenue. If a company is physically present in a country, it could be taxed. Then came Google, Facebook, Amazon and others, and such hard and fast rules turned to smoke.

But efforts are being made to claw back some of this lost booty. The Organisation for Economic Cooperation and Development (OECD) has spent recent years convening negotiations, warning that failing to reach an agreement could reduce the global economy by over one trillion dollars per year.

"The alternative to finding an agreement would be a trade war," Angel Gurria, the OECD's secretary-general, told reporters in 2020. As nations try to rebuild their economies from the coronavirus pandemic, he added that: "...it would inflict a very serious setback."

The original deadline for an agreement was the end of 2020, however we can add that to the list of other projects derailed by COVID-19. France has gone ahead anyway in taxing the US tech giants, with the US, which views the rules as unfairly targeting its firms, threatening harsh tariffs in response.

This is a bit like a bank robber complaining at his arrest when there are still murderers out there. The facts are that the big US-based tech firms are hugely profitable, and are well-known for obfuscating these earnings in efforts to reduce tax. The fact that other sectors and organisations do it too is a weak defence.

One issue is the way in which many people view tax: as a pest to be avoided at all costs. An entire industry has arisen to help individuals and organisations find and exploit loopholes, hide earnings, and otherwise minimise tax.

It should instead be seen as a moral obligation. Tax is a way of redistributing wealth, to support others and fund a huge variety of services - the most critical of which, including the NHS, are now stretched to breaking point.

The financial crash, years of austerity and now the Coronavirus pandemic have shone a light on Britain's ailing services, with millions depending on food banks, social care services, not to mention hospitals, all of which are struggling to maintain effective operations.

The five largest Silicon Valley giants paid $220 billion in taxes over the past decade. That's 16 per cent of their cumulative pre-tax profits. That's a very low rate. Amazon paid £293 million in UK tax in 2019 off the back of profits of sales of £13.73 billion - and that included business rates, coropration tax, national insurance, and stamp duty on its property purchases.

To put that into perspective, the UK's aid budget is around £12 billion. The UN's Food and Agriculture Organisation's estimates cost of tackling global hunger is $50 billion per year (on top of existing funding) to 2025. The huge sums spirited away by the tech giants is money which should be funnelled through government channels into these safety nets. It's a moral obligation.

It's time for big tech to recognise its role and contribute more to the societies it is currently leeching off. The global deal which the OECD is pushing for is likely to impose a fairly low tax rate, by some national standards - though it remains to be seen what impact the Biden administration will have on negotiations. The win for societies will be the ability to correctly and fairly tax digital firms in markets where they operate even without a physical presence. The win for big tech will be avoiding other countries following France and imposing their own rules, creating a global hodge podge including overlapping tax rules and potentially trade and tariff wars.

Apple CEO Tim Cook has supported the calls for reform.

Big tech should help push for the deal this year, and start paying its way.