ActionAid research: World’s largest economies losing up to US$32 billion in annual tax revenue from Silicon Valley’s top five tech companies

  • Date: 20/05/2021
  • Author: ActionAid Ireland

Just one year’s tax bill from the five largest tech companies could have paid for full two-dose Covid vaccination for every human on earth.

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.

Tax revenue from tech giants with an 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 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.
  • Bangladesh could raise a potential US$49.3m in taxes, enough to pay for 12,800 nurses.

Stretching laws and regulations:

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% 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 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.

Inequality has widened

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.

Julia Sánchez,Secretary General of ActionAid International, responding to ActionAid’s new report: ‘Mission Recovery: How Big Tech’s Tax Bill could kickstart a fairer economy’, 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.

Women and young people

“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: US$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.”

Public country-by-country reporting

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. Some companies, like large banks in the EU, are already subject to ‘Public country-by-country reporting’ which involves public disclosure by companies of key financial and tax data, broken down by the countries where they operate. This requirement should be extended to all large multinational companies. Furthermore, countries in the global south should have a meaningful say in setting global tax rules; ActionAid supports the call for the creation of a UN Tax Commission that is empowered and resourced to set and enforce fair tax rules.

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.

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