Digital giants that don’t pay taxes: here’s the roadmap to solving tax challenges with “Big Tech”

ROMA – I Big Tech o Gafam such as (Google, Apple, Meta, Amazon and Microsoft) have larger revenues than the GDP of states such as Sweden or Israel. But they pay little tax and in 40% of cases in tax havens. Now, however, the game passes from the malleable G20 and OECD to the United Nations.

Digital taxation on the international political agenda. The topic of digital taxation has conquered the international political agenda since the OECD, in May 2019, announced the approval of a roadmap to resolve the fiscal challenges of the transition to the digital economy. Already in 2018 the European Union had developed a set of rules to balance a fiscal asymmetry with very negative economic impacts between digital companies, which paid an average of 9.5% in taxes, and traditional business, subject to a taxation of 23.2%. The issue has come back into focus recently with the negotiations on the so-called Future Pact concluded in September at the United Nations General Assembly. The Pact, full of ambitious aspirations, also includes the definition of a Global Digital Compact which does not avoid the issue of taxation.

Galeotto was COVID-19. The need to tax Big Tech it imposed itself with an order of priority in the aftermath of the overwhelming wave of profits that technological multinationals recorded during the pandemic crisis, at the precise moment in which most states were dealing with the harsh repercussions of the global economic crisis triggered by the virus , and with the urgency of recovering new financial resources. The inherently cross-border nature of digital business has also prompted national governments and supranational entities such as the European Union to discuss policies and negotiate regulatory frameworks, driven by the urgency of adapting to the new digital industrial era.

In 2021 the G7 found unanimity. In the midst of the pandemic, in June 2021, the G7 countries managed to find unanimity on the countries’ fiscal sovereignty aimed at imposing a global tax of at least 15% for all multinationals, including digital ones, regardless of their administrative location. The agreement, unprecedented, despite the very modest percentage of taxation in an international perspective (the average level of corporate taxation is around 25%), was considered by the then British Finance Minister Rishi Sunak “a financial reform of seismic flow”; as such it was confirmed in October 2021 by the G20 under the Italian presidency, with an international consensus also extended to the major countries of the global South.

But between saying and doing… If on the one hand the global tax appears to be a missed opportunity from the point of view of recovering additional resources, and the risk of the minimum threshold of 15% being that it becomes the maximum threshold due to competitive pressure, on the other the recent developments in the digital economy have revealed significant cognitive, legislative and administrative gaps when it comes to imagining the taxation of Big Tech. By this denomination we mean the digital mega-industries of the global North – the unattainable so-called GAFAM oligopoly: Google/Alphabet, Apple, Facebook/Meta, Amazon and Microsoft – which have achieved dizzying revenues during the pandemic crisis.

The new paradigms introduced. This unexpected one business opportunity has allowed technological giants to introduce new paradigms of human relations and business operations, to replace those abruptly interrupted by the contagion, and to reconfigure online advertising, l‘e-commerce and the entire range of commercial exchanges. In some cases, their profits have dwarfed states’ GDP.

Colossi that alone are in the ranking of the world’s largest economies. For example, when compared to the nominal value of the GDP of individual countries, the 260 billion in revenues accumulated by Amazon in 2020 made the multinational the forty-second largest economy on the planet. This statistic, already impressive when taken individually, becomes somewhat ominous when considering the profits of the GAFAM group as a whole. It was calculated that in 2020 the GAFAM oligopoly would be positioned as the eighteenth largest economy in the world, overtaking major nations such as Poland, Sweden, Ireland, Israel 2.

* Nicoletta Dentico – Head of the Health Justice Program, Society for International Development (SID)