Windfall tax campaign for big technology companies

Our latest tax campaign is designed to encourage the government to impose a windfall tax on ‘Big Tech’ companies to help cover the social costs of the pandemic’s impact.

Why are we doing this?

The financial cost of tackling the coronavirus crisis in the UK alone will be enormous – somewhere in the region of £300 billion or more. At the same time, profit-shifting to tax havens is costing the UK something like £7 billion per annum in lost corporation taxes. This is the equivalent of a year's pay for around 180,000 nurses.

Some of the most high-profile avoiders of corporation tax are Silicon Valley mega-corporations such as Facebook and Google. The same companies are also turning out to be some of the biggest winners from the COVID-19 pandemic.

We think that most people will find it particularly jarring that some of the companies who have most egregiously failed to pay their way while cuts have depleted NHS capacity, are now raking it in while society buckles under the worst public health crisis for a generation.

It therefore makes sense to start talking about how they might make a fairer contribution to the public services on which they, just like the rest of us, rely.

The 2021 Budget

Although, despite our campaign, a windfall tax on Big Tech companies was noticeably absent from Rishi Sunak’s  March Budget Statement, public outcry at the 1% pay rise for NHS staff has focussed minds on government claims that this is ‘as much as we can’ afford in these ‘tough times’.

Our calls for reform include an ask to increase the Digital Services Tax from its current 2% to 10%. This would bring in roughly £1.5bn – more or less enough to cover a 3% increase on its own. This is not as much as the Royal College of Nursing is asking for (12.5%), but is considerably better than the current offer.

This is before the notion of creating a new Digital Sales Tax is explored (another element in our reform requests). This is likely to bring in significant additional sums and is already receiving widespread support from high street retailers.

Image: Tax Haven British Virgin Islands

A new agreement at the OECD for tax havens

On Saturday 5th July, the Group of 7 (G7) countries of: Canada, France, Germany, Italy, Japan, the UK and US, agreed in principle a global minimum corporate tax rate of 15%. Later in the month, the G20 group of countries and more than 100 others agreed to the proposals, meaning they are looking increasingly likely to become adopted. This means that tax havens such as Bermuda, Luxembourg and the Cayman Islands would no longer be able to operate so effectively as escape routes for corporate profits. Not only is the USA pushing for a 15% minimum tax rate, but President Biden is also raising the US corporate tax rate from 21% to 28% to fund infrastructure investment.

At Ethical Consumer we welcome these proposals, viewing them as a historic and major win for the cause of tax justice, and which will do much to solve the systematic abuses by tech companies particularly. As we have argued in our Tax Tech Now campaign, the Covid-19 pandemic have made the case for greater state intervention in the economy and the need to fill Treasury coffers to support that. As such, even in their imperfect state, these proposals should be championed.

However, we also support the position of the Tax Justice Network which argues that the 15% global minimum tax rate does not go far enough and that, in its current form, the benefits are not shared out fairly enough between rich and poor nations of the world. It proposes instead a Minimum Effective Tax Rate (METR) which, it claims, would raise $460bn globally, rather than the estimated $275bn in the OECD's approach.

It should be noted that none of this would have been possible without the Covid-19 pandemic and the massive government intervention that arouse because of it. It seems as though the tide is shifting against the laissez faire, neoliberal economic consensus that has dominated the political mainstream for the past 40 years.

We talk more about the OECD's proposals and why we are continuing to demand a windfall tax on tech companies in an additional article.

We are asking:

Consumers

  • To use Ethical Consumer product guides (especially our technology guides) to avoid participating, as much as is practical, with the products of the worst big tech tax avoiders until they improve what they are doing.

Governments

  • To increase digital sales taxes to 10% as a post-COVID emergency action until such time as an agreement on curbing tax avoidance is reached internationally.

Tech companies

  • To wind down all tax avoidance schemes and begin to make reasonable contributions to the post-COVID societies in which they operate. We also ask them not to contribute to industry groups lobbying to prevent ethical tax reforms and interventions.

Campaign resources

There are several pieces of research that sit behind this campaign.

  1. Big Tech must pay more tax to help our post-COVID societies 

    In this article, where we first talked about this campaign, we try to estimate the size of tax avoidance by the tech companies and explore how to make the case for intervention.

  2. Taxing Big Tech: The Next Steps

    In this article we look in detail at the mechanism of the Digital Services Tax and how in needs to be improved to properly capture the lost revenue from tax avoidance.

  3. Writing to the Government on Tax
    In this article we explain the impacts of the COVID pandemic on our tax base and give recommendations for those wanting to aid the UK's recovery from coronavirus.

  4. Online sales tax
    In this article we look at discussions around an online sales tax and how this differs from our proposed digital services tax increase.

  5. How other countries handle digital services tax
    In this article we explore how other countries in the world have handled digital services tax.

  6. The OECD and an end of the era of tax havens?
    In this article we discuss the new proposed global minimum corporate tax rate of 15% and the impact this might have on tax havens and on companies like Amazon.