It’s Time to (Actually) Tax Amazon, Facebook, and Google
A global minimum tax rate is a boon for economic equality
A global minimum tax rate is a boon for economic equality
It was called the Double Irish with a Dutch Sandwich. Before Google went public, it wanted to find a way to avoid paying taxes, so it hired a team of lawyers and accountants to restructure the California-based company.
The money magicians went to work. They set up an Irish subsidiary that shifted revenue to a Dutch company with no employees. From there, the money was sent to a Bermuda shell company owned by a second company back in Ireland. The money never moved, but the paper shuffle made it nearly tax-free.
It shielded Google from tens of billions in tax — $23 billion in 2017 alone — and probably added $100+ billion to the company’s market cap.
Since then, hundreds of other multinationals included Apple, Airbnb, GE, IBM, Starbucks, Microsoft, Facebook, Nike, Skype, Johnson & Johnson, and Pfizer have used similar strategies to avoid paying the costs of civilization.
The real takers
American corporations keep three trillion in offshore tax havens.
Two trillion dollars have left Africa for western banks.
The top few thousand people are impoverishing the masses.
Al Gore runs a $32 billion offshore “eco fund.”
Shakira was forced to repay $17 million that she owed.
Her hips don’t lie but her tax forms do.
In total, the global rich hold $32 trillion offshore.
It’s enough to fund universal healthcare.
It’s enough to send everyone to college.
It’s enough to rebuild our crumbling infrastructure.
It’s enough to transition us to sustainable energy and save the planet.
It’s enough to feed and house every man, woman, and child on earth.
Offshoring money isn’t difficult. You just need a tax lawyer, a corporate accountant, and enough potential tax savings to justify their hefty fees.
Flourishing society be damned.
Corporations care about you.*
They care that you’re a customer, ideally with a credit card on file so they can charge you on a recurring basis. Think: banks, insurance, landlords, Netflix.
You’ll own nothing and you’ll be happy, remember?
Corporations care about you as a customer, but they don’t care about you as an employee or a citizen or a creature living on planet earth.
You’re just a profit center.
There are huge flaws in commodification-thinking.
If customers aren’t also well-paid workers, they can’t be a good profit centers.
If workers aren’t well educated, they don’t make good employees.
If workers aren’t healthy, they also don’t make good employees.
If a country is rife is corruption, crime, civil war, or bad infrastructure, companies can’t have steady customers.
If you live on a resource-strained planet, your company is totally screwed.
When you do the math, and look at how modern companies are being run, you can’t help but realize: They’re ALL trying to extract the maximum amount of value from workers, customers, and the planet while simultaneously paying as few of the costs as possible.
And as billions of us are discovering, it’s a raw deal for us at best, and more than likely will lead to the demise of civil society.
We need a global minimum tax rate
Right now, companies like Apple, Amazon, and Google can just offshore the majority of their profits in low-tax nations, regardless of where the sale took place. (For instance, if someone buys a book on Amazon in the United Kingdom, the profits are actually booked in Luxembourg.)
All this paper shuffling is costing citizens — you and me — $500+ billion in lost taxation each year.
Tightening our belts?
Living within our means?
Here’s a better idea: Let’s make companies pay what they owe.
Which is easier said than done.
Because taxation is national.
And multinational corporations are international.
The solution? A global minimum corporate tax rate.
Last week, the world’s seven biggest “democratic” economies (US, UK, Canada, France, Germany, Italy, and Japan) agreed to seek a global minimum tax rate of 15%. No matter where a company operates or where it pretends it’s headquartered.
This is a huge deal, with two major benefits for you and me:
1. It helps finance the cost of civilization.
Healthy markets don’t just happen.
Amazon can’t deliver packages without well-maintained roads, bridges, tunnels, sewers, rail lines, airports, and shipping ports.
Walmart can’t sell their Chinese-made garbage without military and policing to quell civil war and general violence.
Google and Facebook can’t hire the brightest minds without a robust education system.
Progressive taxation and accountable+effective expenditure are cornerstones to flourishing society.
2. It levels the global playing field.
“For too long, there has been a global race to the bottom in corporate taxes, where countries compete by lowering their tax rates instead of the well-being of their citizens and natural environments.” — US Treasury Secretary Janet Yellen
People like you and me can’t create an Amazon challenger or a meaningful Coca-Cola competitor. (Heck, even billionaire Richard Branson tried and got absolutely crushed.)
If a multinational pays zero in corporate taxes but your small business pays 10–25%, it means they’ll always be able to beat you at price and growth.
Tax havens create economic inequality.
And perhaps worse, they quash real innovation. Because the bigs have such an enormous advantage, they can use their tax-free cash horde to buy up their competitors. (Just look at the new richest man in the world and how he swallowed 75 of his competitors, or how Coke has bought out more than 400 of their competitors.)
When the tax playing field is leveled, the truly greatest companies will finally be able to rise to the top.
Where does it go from here?
“[The tax will] end the race to the bottom in corporate taxation and ensure fairness for the middle class and working people in the US and around the world.” — US Treasury Secretary Janet Yellen
The G-7 will present their proposal to G-20 finance ministers in Venice in July. The deal could be signed by October, at which point the nations — led by the US, China, and the EU — will need to get the rest of the world to fall in line. That is, of course, if the deal gets past US Congress.
It’s in the best interests of the large nations to make this happen. After all, every single one of the world’s biggest countries has a domestic corporate tax rate of over 15%. By implementing this law, they’ll claw back hundreds of billions in lost taxation. So expect them to put enormous pressure on offshore havens like the Cayman Islands and Monaco to make them fall in line.
It remains to be seen how the elites will respond. Obviously, this will seriously cut into their Smaug-like piles of wealth, but it will also level the playing field. Instead of having to constantly compete on tax competitiveness, the world’s largest companies can get back to battling for market share by offering better products and services. Libertarians and so-called “free” marketers should especially welcome this new approach to fair play. We’ll see if the hyper-rich actually care about fair play, or if they’ll just get their rented politicians in Congress to block it.
Treasure Islands is my favorite book on tax havens by far. Just read it and weep!
The Finance Curse will blow your mind and make you scream. The basic thesis is that corporate-captured “democracies” are over-financialized (IE too many banks, insurance companies, wealth managers, etc.) and that the inefficiency is actually costing civilization. (In Britain, it’s cost every single family more than $230,000.)
The Joy of Tax will completely change your outlook on taxation — it’s the means by which civilization is funded, and this book will help you appreciate good governance and want it to flourish.
A global minimum corporate tax rate will level the playing field so that small businesses can genuinely compete (at least on the tax front) with multinational monopolies.
A global minimum corporate tax rate will help finance the real costs of civilization by actually making companies like Amazon, Facebook, and Google pay a fee for accessing our functioning economy and society.
We need this to happen.
Otherwise, the rich will keep getting richer… and you and I will be stuck footing the bill.