Sarah Ingham: Tech, tax – and out of this world wealth

12 Jun

Sarah Ingham is a writer and a Conservative Party member.

It’s been a good week for Chancellor of the Exchequer and a so-so seven days for the richest man on the planet, Jeff Bezos.

The agreement between G7 Finance Ministers to introduce a global minimum tax rate of 15 per cent on businesses was hailed as historic by Rishi Sunak. This should lead to “the largest multinational tech giants paying their fair share of tax in the UK”.

“About time too!” cries Britain, nodding in approval at this “seismic tax reform” – ©No 11 Downing Street.

The full consequences of the tech revolution we have been living through for the past two decades or so are, as yet, unknown. Dot dot dot com. The most tangible IRL effect can be seen in the nation’s high streets which have been hollowed out by the switch to online shopping and services such as banking.

In 2006 – tech world’s pre-iPhone Pleistocene epoch – online sales accounted for 2.8 per cent of total retail sales in Britain, according to the Office for National Statistics. By June 2019, this had risen to 18.3 per cent. In January this year, a whopping 36.3 per cent of all retail sales were online. Lockdown, the government’s chosen response to Covid-19, accelerated an existing trend.

In March, USDAW highlighted that many retailers and their employees were at ‘breaking point’, with 180,000 jobs lost and 16,000 store closures in 2020. Famous names went into administration, including Laura Ashley and Jaeger. While Debenhams and the Arcadia Group, which includes Topshop, live to fight another day as brands, the rescue package for both did not include the bricks-and-mortar stores, resulting in 25,000 job losses, 80 per cent of them women employees.

Months before the Covid virus decimated the travel industry, Thomas Cook collapsed, stranding 150,000 holidaymakers abroad. Founded in 1841, the travel agency toppled under the weight of old-fashioned debt as much as innovations in the sector. The firm’s slogan ‘Don’t just book it, Thomas Cook it’ became as redundant as its 560 town centre stores, because millions of us chose to cut out the middleman and book a trip ourselves. A few clicks on a smart device secured us a budget airline ticket to fly us to our Airbnb.

How concerned have we been about the advance of e-commerce? Online shopping can be seen a quicker, easier, twenty-first century version of mail order catalogues, which have been a huge social benefit ever since the mid nineteenth century.

‘Don’t Be Evil’ has now been removed from Google’s code of conduct. Turning Britain’s social fabric inside-out is not exactly evil, but has been far from an unalloyed public benefit. It is, however, too easy to blame the tech giants, rather than examining our own code of conduct as individual consumers: ‘Alexa, save my local bookshop.’ Communities are not built or sustained by us sitting on our backsides watching a movie on Netflix while we tuck into a Deliveroo.

‘As public finances are ever more strained due to Covid-19, the public’s tolerance for tax avoidance by multinational companies is nil,” declares the Organisation for Economic Cooperation and Development, in its Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors. Really? Tax evasion is illegal and tests public tolerance. Tax avoidance is about exploiting the loopholes caused by an unnecessarily complex taxation system overseen by finance ministers and central bank governors.

The OECD worked on the proposals to rewrite the global tax rules which are being advanced by Sunak and his G7 colleagues. In the days since the announcement confusion has arisen, not least about whether any changes will be agreed by the G20 and if Britain is seeking to get financial services excluded from the reforms.

Alexa, is the UK’s Digital Services Tax going to be scrapped in exchange for the global tech tax? Effective from April 2020, HMRC predicted it would raise £515 million by 2024/25. It seems that tech firms might actually pay less into the UK’s coffers if the reforms were adopted and digital sales tax abolished.

The tech titans themselves seemed none-too-bothered by this possible new assault on their finances. Apart from Netflix, the other four FAANGs – Facebook, Amazon, Apple and Google – have seen their share prices rise in the past week.

Just as possible changes to the international tax system have come onto the agenda, details of US billionaires’ tax returns have mysteriously found their way into the public domain. Tada!

Warren Buffett is among the Croesus-rich outed by investigative journalists at ProPublica as paying little or nothing in the way of income tax. Perhaps the OECD’s Tax Inspectors Without Borders team can explain to breathless hacks the difference between income and capital.

Amazon’s founder, Jeff Bezos, whose personal wealth has ping-ponged around the $200 billion mark since last August, apparently paid no income tax during 2007 and 2011, while Tesla’s Elon Musk, vying with Bezos for pole position in the global wealth stakes, paid none in 2018. Neither has done anything illegal. The public was probably far less tolerant of Amazon withholding tips to its delivery drivers, for which it was fined $62 million in February.

Perhaps their stratospheric wealth explains Bezos and Musk’s fascination with space exploration. It would be easy to write off the attitude of both as ‘only little earthlings pay taxes’, but the current taxation system, bound up as it is with national sovereignty, allows them to get away with it. If we had the money, and the money to afford the accountants, we’d probably all be into ‘tax planning’, which is fancy pants for haggling with HMRC.

Time for flat taxes, Chancellor. And, BTW, voters have a tolerance for keeping their own money rather than handing it over in taxes – even to you.