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TAXING TIMES FOR BIG TECH

TAXING TIMES FOR BIG TECH

The taxman is coming for Big Tech. This week, the UK's Chancellor of the Exchequer Philip Hammond (pictured above) revealed plans to levy a 2 percent tax on the revenue generated in the country by the world’s biggest search engines, social media sites, and e-commerce companies starting in 2020.


It’s not just the UK that’s looking for ways to squeeze more tax revenue out of digital disruption. French President Emmanuel Macron is pushing a similar proposal in the EU. Malaysia, Colombia, Uruguay, Qatar, and Bahrain are among the countries that have either introduced new taxes on digital companies in recent years or are considering doing so.

And it’s not just about the money – although the UK estimates the new digital levy will raise £400 million a year once it’s up and running. Here are some of the political drivers behind the trend:

Concerns about fairness: Facebook, Amazon, Alphabet (the parent company of Google), and other big online platforms have grown rich by harvesting the personal data of billions of users, analyzing it, and using what they learn to get people to buy more stuff. These companies have reaped windfall profits but paid a paltry amount in taxes, thanks in part to clever accountants who shift ephemeral assets like software code and patents to low-tax countries. Google collected £7.6 billion of revenue from UK users last year, but it paid just £49 million in taxes there. It’s a feat that’s getting harder to pull off politically in an age of rising populism.

A new social bargain with Big Tech: This isn’t just about financial fairness. It’s about a shift in the basic social bargain that’s allowed Silicon Valley companies to operate for the past decade. Until now, these firms benefited under a simple quid pro quo with their users: We use your data to get rich, and in return, provide a free (or mostly free) service that makes your life better. Then the negative social consequences started to become clearer – stoking divisions, allowing governments to spread propaganda, and undermining confidence in democracy. Governments are now reasserting themselves through taxation and regulation over what they perceive to be growing digital threats.

“No, you go first”: Despite a growing desire among countries to raise taxes on big tech, it’s been hard to get any one country or bloc of countries to move first. In part, that’s because countries fear going it alone will just encourage these companies to move their profits elsewhere. Emmanuel Macron’s push for a European digital services tax has met resistance from smaller European countries – like Ireland – which want to attract digital firms and see low tax rates as an important part of their appeal.

The US, meanwhile, is opposed to tax reforms that target the digital companies that have created high paying American jobs and billions of dollars of shareholder value. The UK’s decision to go for it may increase the chance that other EU countries fall in line behind France’s broadly similar approach. It envisions a lower tax rate than the proposal being pushed by France, and would be dropped if countries around the world agreed to more comprehensive global reform.

The bottom line: The UK’s latest move is a big departure for governments contemplating how to deal with global tech giants. We’ll see whether it means a more expensive era for big tech.

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Watch Ian's human approach to communications on the most recent episode of Faces of Eni.

Today at 12 noon EST, join GZERO Media for a virtual Town Hall, "Reasons for Hope: COVID and the Coming Year," presented in partnership with Eurasia Group and The Bill & Melinda Gates Foundation. Our panel will discuss the road ahead in the global response to the COVID crisis. Will there be more multilateral cooperation on issues like gender equality moving forward from the pandemic?

Watch the event here: https://www.gzeromedia.com/townhall

Our moderator, CNBC health care correspondent Bertha Coombs, along with Ian Bremmer, president of Eurasia Group and GZERO Media, and Mark Suzman, CEO of the Gates Foundation, will speak with distinguished experts on three key issues:

Heidi Larson, Director, The Vaccine Confidence Project

  • How will COVID vaccines be distributed safely?

Minouche Shafik, Director of London School of Economics & Political Science

  • How has the pandemic disproportionately impacted women?

Madeleine Albright, Chair, Albright Stonebridge Group and Albright Capital Management; former US Secretary of State

  • What is the opportunity for global cooperation emerging from this crisis, and what are the greatest political risks?
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How to capture the essence of this incredible, terrible year in a few short words and without using profanity? It's not easy.

Thankfully, the dictionary website Merriam-Webster.com has released its list of most heavily searched words of 2020, and they tell the story of an historic year in US politics and the life of our planet. Here's a sample.

The top word, unsurprisingly, was "Pandemic," a disease outbreak that covers a wide area and afflicts lots of people. In 2020, the coronavirus crisis hit every region of the world, triggering a public health, economic, and political emergency on a geographic scale our planet has never experienced. Differing responses to that problem defined the politics (and geopolitics) of 2020.

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While recent news from Pfizer, Moderna and AstraZeneca on the efficacy of their respective COVID vaccines is encouraging, it has also given rise to bidding wars between wealthy countries trying to secure the largest supply of the new drugs for their citizens. Meanwhile, many governments in emerging market economies, where healthcare infrastructure is generally weaker, are worried they'll be kicked to the back of the line in the global distribution process. Indeed, history bears out their concerns: while a lifesaving HIV treatment hit shelves in the West in the mid-1990s, for example, it took years to become widely available in Africa, which saw some of the worst HIV outbreaks in the world. But here's the catch: even if wealthy countries manage to obtain large supplies of vaccines to immunize their populations, the interconnected nature of the global economy means that no one will really be out of the woods until we all are. Here's a snapshot of how many COVID vaccines select countries have already purchased.

Afghanistan's small breakthrough: For months, disagreements over a range of political issues have hamstrung the intra-Afghan peace talks brokered by the Trump administration that aim to bridge the years-long conflict between the Afghan government and the Taliban. But this week, a significant breakthrough was made on the principles and procedures governing the talks, that, experts say, will help push negotiations to the next phase. One key advance is agreement on the official name of the Afghan government, an issue that stalled talks earlier this year. Still, progress is fragile. Taliban violence and efforts to seize territory have only increased since the militants and the US reached a deal in February on a blueprint for an American troop withdrawal. And the Trump administration says it aims to pull out all but 2,500 US troops by mid-January, whether the Taliban have kept their end of the deal or not. What's more, while this week's development puts the parties one step closer to an eventual power-sharing agreement, it's unclear whether the incoming Biden administration will even honor the Trump administration's deal with the Taliban.

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Reasons for Hope: COVID and the Coming Year. Watch on Friday. Dec 4 2020 12 noon - 1 pm ET

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