Tax evaders can help foot the world’s bill for coronavirus spending

Digital companies such as Google, Apple, Facebook and Amazon are champions of tax avoidance. Photo:…



Digital companies such as Google, Apple, Facebook and Amazon are champions of tax avoidance. Photo: AFP


Digital companies such as Google, Apple, Facebook and Amazon are champions of tax avoidance. Photo: AFP

Remember the “world after the pandemic”? The Covid-19 crisis has caused mourning in hundreds of thousands of families and brought the world’s economies to their knees; but by forcing more than half of humanity to stop, it has also forced us to think, to dream, of a fairer, more egalitarian, greener world.

In that world, we would recognise the importance of quality public services, having seen health workers fighting heroically against the virus and teachers trying to keep in contact with their students, despite lockdowns and lack of resources. But it is the companies that have been pleading for more state interventions recently.

Cynicism about big business prevails. Of course, the big brands did not hesitate to advertise timely operations of “solidarity” – by donating masks and gel, for example. But all over the world, many of them plan on paying out billions in dividends, even after benefiting from state handouts.

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In France, for example, half the CAC 40 index – representing the 40 top companies by market capitalisation – still decided to pay out between Euro35 billion (US$41.4 billion) and Euro41 billion in dividends, despite receiving state aid in the form of the short-time work scheme, as reported by Oxfam France.

The soaring dividends are feeding the billionaires, though the European ones are not the champions of indecency. In the United States, the assets of 600 billionaires grew by a good US$434 billion, or 15 per cent, during the first two months of lockdown, according to an analysis of Forbes data. The fortunes of Amazon CEO Jeff Bezos and Facebook creator Mark Zuckerberg alone increased by nearly US$60 billion.



Mark Zuckerberg standing in front of a flat screen television: Facebook CEO Mark Zuckerberg testifies before the US House of Representatives Judiciary Subcommittee on Antitrust, Commercial and Administrative Law in Washington, D.C., on July 29. Photo: Reuters


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Facebook CEO Mark Zuckerberg testifies before the US House of Representatives Judiciary Subcommittee on Antitrust, Commercial and Administrative Law in Washington, D.C., on July 29. Photo: Reuters

This is no coincidence, as digital companies that do not need to physically interact with the public have benefited the most from the pandemic, often at the expense of small and medium-sized distribution firms.

Ironically, these multinational digital companies are also champions of tax avoidance. The GAFA, as they are called – Google, Apple, Facebook and Amazon – are not the only ones who do not pay taxes according to their activities, but because they are dematerialised, they are able to exploit the loopholes in the international tax system more easily.

Cash-strapped governments see revenue in US$26 trillion online industry

By manipulating transactions between their subsidiaries, they are reporting record profits in tax havens and very low ones in countries with higher corporate taxes, even though they are actually operating extensively in the latter. For example, Amazon, despite doubling its profits in the US in 2018, didn’t pay a single dollar in taxes there for the second year in a row.

This is why, while keeping in mind that the US administration has just announced that it is no longer taking part in negotiations to overhaul the international tax system, it is urgent for countries to introduce, regionally or unilaterally, temporary taxes at least on the digital giants. This is one of the five main recommendations that the Independent Commission for the Reform of International Corporate Taxation (ICRICT), of which I am a member, alongside economists such as Joseph Stiglitz, Thomas Piketty and Gabriel Zucman, has just made to enable states to cope with the explosion in spending caused by the pandemic.



a person holding a sign: A placard is held up during a workers' rally in Hawthorne, California on May 1 to demand a safer work environment and better pay during the coronavirus outbreak. Photo: AFP


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A placard is held up during a workers’ rally in Hawthorne, California on May 1 to demand a safer work environment and better pay during the coronavirus outbreak. Photo: AFP

When the International Monetary Fund is expecting a global recession of 4.9 per cent, austerity is no longer appropriate. We need to invest in health, schools and infrastructure, but also support businesses, especially the smallest ones. Even if some governments pretend to ignore the fact that we will have to foot the bill in the end, we must turn to those who benefit from the system without contributing to it.

Governments must also apply a higher corporate tax to companies in monopoly or oligopoly situations, especially those that are profiting from the crisis, such as the pharmaceutical sector. Above all, we must not succumb to the siren call for tax cuts, which big companies claim are “necessary for reconstruction”.

We already know that in normal times, it is not taxation that pushes a company to invest in a country – it is more the quality of infrastructure, the workforce or political stability. When projects are constrained by uncertainty, it is not tax cuts that will stimulate private investment. On the other hand, tax cuts would certainly deprive governments of valuable resources.

Finally, to protect and increase these resources, we must make a major effort to uncover the amounts hidden in tax havens. This concerns those with large fortunes, of course, but above all the multinationals. The latter must undertake to declare where and how much they earn on a country-by-country basis. This would allow governments to tax them at a rate of at least 25 per cent, according to ICRICT.

In concrete terms, if a French multinational decides to declare its profits in Hong Kong to take advantage of a very low tax rate, for example, France would be able to recover the difference. This measure would quickly make the raison d’Etre of tax havens disappear.

And for once, governments are in a good position to impose this transparency. All they have to do is announce, as France and Denmark, among others, have already done, that companies with headquarters or subsidiaries in tax havens – without carrying out any real activity there – will not be entitled to Covid-19 aid.

There is no time to lose. The 2008 financial crisis made us dream of a fairer world, with results we all know about. Losing this new opportunity, at a time when human and climate crises are multiplying throughout the world, would be unforgivable.

Eva Joly is a member of the Independent Commission for International Corporate Tax Reform (ICRICT) and a former Member of the European Parliament, where she was vice-chair of the Commission of Inquiry into Money Laundering, Tax Evasion and Fraud

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