The financial cost of tackling the coronavirus crisis in the UK alone is going to 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.
As we see below, 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.
How are the tech companies performing?
Netflix, Amazon Prime Video and Google-owned YouTube have faced such an enormous surge in demand that they have had to downgrade the quality of their streaming services across the EU. Microsoft said in mid-March that it had added 12 million daily users in one week to its collaborative working Teams platform. Facebook said that messaging activity over the platform increased by 50% in those countries hit hard by the virus.
The tech companies aren’t getting off entirely scot-free – supply chains for some physical tech products have stalled, which hit Apple. And online advertising spending has fallen. But overall, they are doing well and all of their shares have outperformed the market since late January.
This puts them at a huge competitive advantage over many smaller businesses and positions them to be able to pick some of them off in their weakened state.
The tax avoidance of the tech companies
The big tech companies deal substantially in intangible things like patents which can be located anywhere, which makes it easy for them to avoid tax. And they have long been some of the companies most heavily implicated in it.
It’s always very difficult to put figures on tax avoidance because it is about the spirit rather than the letter of the law. However, the Fair Tax Mark’s 2019 ‘Silicon Six’ report did an analysis of the global cash tax paid by big tech companies and found that:
“Overall, the Silicon Six paid just 15.9% of corporation tax (cash) on their declared profits over the period 2010 to 2017 inclusive, at a time when the headline rate [in the US] was 35%. The levels of tax paid are well below those paid by the majority of other businesses in the United States, which studies have found to be a mean of between 29.1% (1995-2004) and 26% (2008-2014).”