The tax theft of big technology
Ultimately, it will not be the financial crisis of 2008 but the coronavirus of 2019 that causes a reset capable of reformatting the global economy. The G-7 economy ministers have just agreed on a minimum corporate tax on a global scale that, if not twisted, will be approved at the G-20 summit scheduled for July in Venice. The OECD proposed it in 2019 as the first step to build a new international tax architecture and this time it seems that it will not go wrong since one of its main supporters is the president of the United States, Joe Biden. In 2008, after the financial disaster that followed the bankruptcy of Lehman Brothers, many rulers were frightened to the point that French President Nicolàs Sarkozy even proposed the re-founding of capitalism. But as soon as recovery arrived, after Europe succumbed to austerity policies that aggravated the consequences of the crisis and increased inequalities, everyone returned to their businesses and no one else remembered to re-found capitalism.
Until the coronavirus arrived and in two months it paralyzed the world economy. The pandemic can now become the great accelerator of the transformations that the world needs. From the outset, those who always clamored to thin the public sector and pointed to the State as the cause of all ills, rushed to ask it to come to the rescue of the economy. But no state can cope with a crisis like this without a solid tax revenue structure. No matter how much they legislate, States can do little if a growing part of the economy, and especially the fastest growing part, which is linked to the digital revolution, does not contribute. There is the paradox that society asks the rulers to intervene to cushion the effects of the crisis, but they have less and less capacity to act because a crucial part of the economy escapes their jurisdiction.
If with globalization the borders became liquid for financial transactions, with the digital revolution the large technological multinationals have become gaseous. The new digital economy has led to the emergence of giants that obtain exponential profitability thanks to their dominant position and their ability to disrupt strategic sectors of the economy. The current international tax system gives them a discretionary power that allows them to escape the tax requirements of each country. They operate all over the world but they can allocate their profits in the most fiscally advantageous jurisdictions and thus minimize taxation for the profits they obtain, a power that other companies lack, especially small and medium-sized companies, which end up bearing the burden. bulk of the tax burden of each country.
The first step of a global tax reform is to ensure that these multinationals are considered a single company and pay taxes where they generate profits. A few days ago it was learned that a Microsoft subsidiary based in Ireland had managed not to pay any tax on the 260,000 million euros of profits it had obtained thanks to this tax avoidance system. Obviously, if you had chosen Ireland to locate your tax headquarters, it is because that country is, with Cyprus, the one with the lowest corporate tax in Europe (12.5%), but also because the tax system allows you to practice what you are. called “the double Irish”, that is, the possibility of invoicing through a tax haven in which no taxes are paid, in this case, Bermuda.
Initially, it had been proposed that the minimum corporate tax was 25%. In his initial proposal Joe Biden proposed to place it at 21% but finally it seems that it will remain at “a minimum of 15%”. The pressures are brutal. The latest report from the US National Intelligence Council, published last April, pointed out that the pandemic has shown the weakness of the world order because the institutions we have are inadequate to coordinate a global response to new challenges. And one of the elements of danger that it indicates for the next decades is the distrust towards the institutions because there is more and more distance between the demands of citizens and the decision-making capacity of governments. Before that becomes a cancer that feeds the monster of the extreme right, action must be taken. The step that the finance ministers have just taken is in the right direction, but it is insufficient. The next step should be an onslaught against tax havens.