US Treasury Secretary Janet Yellen and IMF Managing Director Kristalina Georgieva at the Group of Seven Finance Ministers’ Summit in London.
Photo: Hollie Adams / Bloomberg via Getty Images
For many years, the corporate behemoths have made tax avoidance strategies a sport. After years of growing outrage at these legal escapes, global governments are taking action. Last Pivot podcast, Kara Swisher and Scott Galloway discuss the historic G7 deal to impose a minimum tax on companies like Apple and Google.
Kara swisher: G7 Summit of Nations Reach Historic Agreement on Global Tax Reform. Over the weekend, finance ministers from those advanced economies backed the U.S. proposal, which asks businesses around the world to pay at least 15% corporate income tax rather than 0% tax, or the very low taxes most of them pay. The countries included are Canada, France, Germany, Italy, Japan and the UK, and US Treasury Secretary Janet Yellen said the tax would “end the race to the bottom of corporate taxation and ensure fairness for the middle class and workers. in the United States and around the world.
Not included here are all low tax jurisdictions like Ireland, Malta, Cyprus – and I don’t know if that works if they continue to exist, these low tax jurisdictions. But what do you think, Scott?
Scott Galloway: I think it’s really important. And fantastic leadership from the G7, and in particular from Berkeley professor Janet Yellen, who just does the job silently and does a great job. This is important because Amazon’s effective tax rate over the past 10 years, on $ 20 billion in profits, was 4.5%. Apple does all kinds of Double Dutch Sandwich tax avoidance. And when the G7 meets, they canâ¦ First of all, a lot of these tax havens are – I don’t mean controlled by the UK, but influenced by the UK – the Isle of Man and the Ireland. And so I think when the G7 say, okay, this is the global tax rate, they’ll have a chance to talk with a pretty big stick and go to those jurisdictions and say, overnight , we will bankrupt you. We’ll find a way to stop it.
I think that’s a fantastic thing in terms of global cooperation – it’s almost like a modern day NATO, where the enemy is not Russia, the enemy is made up of organizations that have gone beyond the government. and do not pay their fair share. The thing that will lead to is an interstate tax treaty in the United States. But I think it’s wonderful. I think it shows incredible leadership and coordination. I like it when democracies join hands. It used to be the G8, and then we kicked out this gas station pretending to be an economy called Russia.
Swisher: You mean a mafia-run gas station, billing as an economy.
Galloway: Here is. But look, I think we’ve been so divided internally because of bullshit, just divisions propagated by amplification algorithms and bad actors. I think all the news where a confederation of democracies does something like that, I think it’s wonderful. I’m excited about it.
Swisher: OK. Biden therefore proposed the 20% tax; it was traded until 15. Is this a big deal? He’s going to have to take lower numbers, right?
Galloway: Yes. But that’s more than they pay. I think it’s a good start. And then when they see that it’s effective, they can decide to increase it. It’s going to create, I think, between $ 350 billion and $ 500 billion a year in additional revenue. It is money that these nations need.
Swisher: Yes, after the pandemic. We have talked about this single tax on the rich or the rich corporations. One of the interesting things here is that the return of the United States made this happen. That wouldn’t have happened under Trump, obviously. He wanted to impose fines on social media companies as a retaliation, and it’s actually a fair way for everyone to pay their fair share.
Galloway: It’s governance. This is real governance.
Swisher: Yes. So what do you think of the tech companies’ reaction to this?
Galloway: You know what? They do not have the choice. What are they going to say?
Swisher: They had their money repatriated under Trump.
Galloway: Law. What are they going to say? Should we pay less tax than a nurse? I mean, what are they gonna do here? They will find reasons. They’re oddly quiet here, because even Nick Clegg can’t take care of that. And Facebook, of course, came out and said, âWe welcome that. “
But, look, the biggest, most profitable, and most successful organizations in the world should be the biggest taxpayers, not the smallest, and that’s a great first step. And as exciting as it may be about fairness in the tax system and the tax code, it is just plain exciting to see us join hands with our brothers and sisters in Europe. I love it, Kara!
Swisher: It will be interesting to see what happens now. Beyond the G7 leaders, there will be a meeting of G20 finance ministers in Venice in July. And then, of course, there are the negotiations with all the countries of the Organization for Economic Co-operation and Development, 140 countries.
But there is the opposition, as I said, from Ireland – bringing in tech companies from America with a 12.5% ââenterprise rate. They had problems with that. There are other jurisdictions. And, of course, Wall Street is still concerned about a comprehensive tax standard across the world. They like it best when everything is messed up. You know what I mean? They like it best when it’s confusing and difficult.
Galloway: The complexity is the tax on the poor and on small and medium-sized enterprises. And like I said, if you can sail by starlight you want to do night boat races with lots of islands and obstacles. And the reason the banks don’t like it is that they like being able to do these ridiculous things in the Cayman Islands and find a way to pay less tax than someone who has seven dry cleaners. It is therefore an excellent initiative.
Swisher: We’ll see if they push it properly. He has momentum, however. And it’s gaining momentum because Biden is talking about it, and they need the pandemic money. They need it. And these companies have never done better, and they have to pay their fair share.
Pivot is produced by Rebecca Sananes.
This transcript has been edited for length and clarity.