As the rest of the world is locked at home and companies go bankrupt, Big Tech is enjoying a pandemic M&A spending-spree due to record valuations. Richer than ever, they resist the pressure from governments to pay more taxes.
The ‘Big Five’ (Amazon, Alphabet, Apple, Microsoft and Facebook), for example, are announcing 19 mergers and acquisitions (M&As) this year, the fastest pace of acquisitions in five years, according to Refinitiv data cited by the Financial Times this week. Their targets are smaller businesses affected by the coronavirus crisis.
“These companies are already extraordinarily powerful, but they’re well positioned to emerge as the biggest winners of Covid-19 unless some legislative action is taken,” the newspaper cites Sandeep Vaheesan, legal director at the Open Markets Institute, a think-tank that studies corporate concentration.
But only one month ago, the industry lobbying body TechUK (whose hundreds of members include Facebook, Google, Apple and Amazon), urged the Government to “look again” at the Digital Services Tax — a two percent tax levied on UK digital services revenues — citing Covid-19 as the reason.
“Resources are stretched and revenue uncertain,” the body urged, followed by the sound of the world’s smallest violin. Yet, only a month later, the tech powerhouse exchange-traded fund (ETF), Invesco QQQ, which tracks the Nasdaq-100 Index, closed with a market value of over $100 billion for the first time since it began trading in 1999.
Perhaps ‘revenue uncertain’ could in fact mean breaking stock market records, or it’s just another classic case of mo’ money mo’ problems. After all, once the world was no longer allowed outside, even the blind could see that it would become more reliant on technology to get by, increasing these companies’ valuations.
So despite the Big Tech laments, legislative action is actually being taken against these monopolies. At the end of April, amid protests from lobbyists, the UK government held its nerve — with all the major parties in Parliament approving the digital services tax’s passage. Elsewhere in Europe, other countries are drafting and implementing their own digital tax laws.
France, the first major economy to legislate a digital tax (3%), signed it into existence in July last year, sparking a trade war with the US. Paris has since postponed the collection of its first payments until next year to allow time for the OECD (Organization for Economic Cooperation and Development) to come up with a joint digital tax law for all nations. The EU has reported that if the OECD cannot deliver, it will implement its own digital tax law in 2021.
The rest of the world, it seems, has also woken up to the idea that it should get tech to pay its taxes. Countries, from India, Indonesia to Kenya, are adopting or considering new digital services taxes. In South America, Brazil and Chile, among others, have reportedly debated the merits of taxing big tech to help fund the economic stimulus needed post-Covid.
These taxes are posing a great threat to the US economy, a tech lobbyist Clete Willems complained recently hoping Washington would deal with the issues with trade negotiations. Despite constant threats of higher tariffs and other repercussions from the US to countries across the world, the digital services tax looks set to one day become a global norm. Consensus is still being reached via the OECD, but ultimately, as one of the founding signatories of the organisation, the US will have to toe the line once it has been decided upon.
So then, with the worst recession since the Great Depression just around the corner, and the countries’ coffers significantly poorer, maybe the governments will finally stand ground on this. As Benjamin Franklin wrote in one of his letters, “In this world nothing can be said to be certain, except death and taxes.” We’ve had the death, now how about those taxes?
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