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.

Emily Ademola lives in an area of Nigeria that has been attacked by Boko Haram militants in the past. Looking for water was very risky, and without access to water, the community – especially children – were at risk of waterborne diseases. Eni, in partnership with FAO, built a water well in Emily's community in 2019.

Watch Emily's first-hand account about how access to water "close to our doorsteps" has improved the quality of life for her community and her family.

There's never a great time to impose higher taxes on funeral services — but doing it in the middle of a raging pandemic is an especially bad move. Yet that was one of a number of measures that the Colombian government proposed last week in a controversial new tax bill that has provoked the country's largest and most violent protests in decades.

In the days since, the finance minister has resigned, the tax reform has been pulled, and President Iván Duque has called for fresh dialogue with activists, union leaders, and opposition politicians.

But demonstrations, vandalism, and deadly clashes with police have only intensified. Two dozen people are dead, 40 are missing, and the UN has criticized Colombian police for their heavy-handed response.

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While residents of wealthy countries are getting ready for hot vaxxed summer — COVID is still ravaging many low- and middle-income countries. The horrifying scenes coming out of India in recent weeks have gripped the world, causing governments and civil society to quickly mobilize and pledge support.

But on the other side of the globe, Brazil is also being pummeled by the pandemic — and has been for a year now. Yet thus far, the outpouring of aid and (solidarity) hasn't been as large.

What explains the global alarm at India's situation, and seeming passivity towards Brazil's plight? What are the politics of compassion?

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Paris-London face-off at sea: France and the UK are at loggerheads in the high seas this week over post-Brexit fishing access in Jersey, an island off the English Channel. Furious at regulations that they say makes it harder to fish in these lucrative waters, dozens of French fishing boats amassed near the Channel Island, threatening to block access to the port. In response, UK Prime Minister Boris Johnson deployed two naval vessels — a move critics say was an unnecessary escalation, and an attempt by the PM to flex his muscles and bolster the Tory vote ahead of Thursday's regional election. France, for its part, sent its own naval ship and threatened to cut off Jersey's electricity supply, 90 percent of which comes from French underwater cables. Fishing rights was one of the final sticking points of Brexit trade negotiations, an emotive political issue for many Britons who say that they got a subpar deal when the UK joined the European Economic Community in the 1970s. Though an UK-EU Brexit agreement was finally reached in December 2020, it's clear that there are still thorny issues that need to be resolved.

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10: Joshua Wong was sentenced along with other Hong Kong democracy activists to 10 months in prison for participating in a vigil last year marking the anniversary of the Tiananmen Square massacre in Beijing. Wong is currently behind bars for participating in separate pro-democracy protests, and will only start this new sentence after that term concludes in November.

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What's the biggest foreign policy misconception that Americans have about the US's role in the world? According to international relations expert Tom Nichols, too few Americans believe that the US, in fact, has a critical role in the world, and that the things Americans enjoy, from cheap goods to safe streets, are made possible because of American global leadership. "Americans have become so spoiled and inured to the idea that the world is a dangerous place that they don't understand that the seas are navigable because someone makes them that way. They don't understand that peace between the great powers is not simply like the weather, that just happens," Nichols tells Ian Bremmer. Their conversation is featured on an episode of GZERO World, airing on US public television – check local listings.

Watch the episode: Make politics "boring" again: Joe Biden's first 100 Days

The cover story of The Economist declares that Taiwan is "The most dangerous place on Earth," because China might finally be ready to plan an invasion of the island. But are the consequences of such a move worth the many risks to China and its President Xi Jinping? Ian Bremmer breaks out the Red Pen to to explain why a US-China war over Taiwan is unlikely.

We are taking our red pen to a recent article from The Economist. The Economist, you ask, how could I? I love The Economist, I know, I know. But you'd lose respect if I give this piece a pass. In fact, it was the magazine's cover story this week, so I had no choice. The image and headline say it all. Here it is, Taiwan is now "the most dangerous place on earth" as US/China relations continue to sour in the opening months of President Biden's administration.

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Delhi-based reporter Barkha Dutt's decades of journalism couldn't prepare her for the horrific experience of covering the death of one specific COVID-19 victim: her own father. In a conversation with Ian Bremmer, Dutt recounts her desperate struggle to find an ambulance to take her father through Delhi traffic to reach the hospital, only for him to die in the ICU. Their in-depth discussion looks at India's struggle with the world's worst COVID crisis in the upcoming episode of GZERO World begins airing on US public television Friday, May 7. Check local listings.

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Would China really invade Taiwan?

The Red Pen

India’s COVID crisis hits home

GZERO World Clips
The GZERO World Podcast with Ian Bremmer. Listen now.

GZEROMEDIA

Subscribe to GZERO Media's newsletter: Signal