For many years, corporate juggernauts have made a sport of tax-avoidance strategies. After years of mounting outrage at these legal evasions, world governments are taking action. On the latest Pivot podcast, Kara Swisher and Scott Galloway discuss the G7’s landmark agreement to impose a minimum tax on companies like Apple and Google.
Kara Swisher: The G7 summit of nations has come to a historic agreement on global tax reform. Over the weekend, the finance ministers from those advanced economies have backed the U.S. proposal, which calls for corporations around the world to pay at least 15 percent tax on earnings rather than the 0 percent tax, or the very low taxes, most of them pay. The nations included are Canada, France, Germany, Italy, Japan, and the U.K., and the U.S. Treasury secretary Janet Yellen said the tax “would end the race to the bottom in corporate taxation, and ensure fairness for the middle class and working people in the U.S. and around the world.”
Not included here are all the low-tax jurisdictions like Ireland, Malta, Cyprus — and I don’t know if this works if they continue to exist, these low-tax jurisdictions. But what do you think, Scott?
Scott Galloway: I think this is really important. And fantastic leadership on the part of the G7, and specifically Berkeley professor Janet Yellen, who just quietly does the work and does a great job. This is important because the effective tax rate for Amazon over the last 10 years, on $20 billion in profits, was 4.5 percent. Apple does all kinds of Double Dutch Sandwich tax avoidance. And when the G7 come together they can … First off, a lot of those tax havens are — I don’t want to say U.K. controlled, but U.K. influenced — the Isle of Man and Ireland. And so I think that when the G7 say, okay, this is the global tax rate, they will have the ability to speak with a pretty big stick and go into these jurisdictions and say, overnight, we’ll put you out of business. We’ll figure out a way to stop this.
I think this is a fantastic thing in terms of global cooperation — it’s almost like a modern-day NATO, where the enemy isn’t Russia, the enemy is organizations that have overrun government and aren’t paying their fair share. The thing it will lead to is an interstate tax treaty in the U.S. But I think it’s wonderful. I think it demonstrates incredible leadership and coordination. I love it when democracies join hands. It used to be the G8, and then we kicked out that gas station posing as an economy called Russia.
Swisher: You mean mafia-run gas station, posting as an economy.
Galloway: There you go. But look, I think we’ve been so divided internally because of bullshit, just divisiveness being propagated by algorithms of amplification and bad actors. I think that any news where a confederacy of democracies does something like this, I think it’s wonderful. I’m excited about it.
Swisher: All right. So Biden proposed the tax at 20 percent; it was negotiated down to 15. Is that a big deal? He’s going to have to just take lower numbers, right?
Galloway: Yeah. But it’s more than they’re paying. I think it’s a great start. And then when they see it’s effective, they might decide to raise it. It’s going to create, I think, $350 billion to half a trillion dollars a year in incremental revenue. This is money these nations need.
Swisher: Yeah, after the pandemic. We talked about that one-time tax on wealthy people or wealthy corporations. One of the things that’s interesting here is that the U.S. returning made it happen. This would not have happened under Trump, obviously. He wanted to fine social-media companies in a retaliatory way, and this is actually a fair way so that everybody pays their fair share.
Galloway: This is governance. This is actual governance.
Swisher: Yeah. So what do you think of how tech companies are reacting to this?
Galloway: You know what? They have no choice. What are they going to say?
Swisher: They did get their money repatriated under Trump.
Galloway: Right. What are they going to say? We should pay lower taxes than a nurse? I mean, what are they going to do here? They’ll come up with reasons. They’re strangely quiet here, because even Nick Clegg can’t wallpaper over this. And Facebook, of course, came out and said, “We welcome it.”
But, look, the largest, most profitable, successful organizations in the world should be the biggest taxpayers, not the smallest taxpayers, and this is a great first step. And as exciting as it is about equity in the tax system and the tax code, it’s just exciting to see us joining hands with our brothers and sisters over in Europe. I love this, Kara!
Swisher: It’ll be interesting to see what happens now. Beyond the G7 leaders, there’s going to be a meeting of the G20 finance ministers in Venice in July. And then, of course, there’s negotiations with all the countries in the Organization for Economic Cooperation Development, 140 countries.
But there’s opposition from, as I said, Ireland — which brings in U.S. tech firms with a corporate rate of 12.5 percent. They had problems with it. There’s other jurisdictions. And, of course, Wall Street’s always worried about a global standard of taxation across the world. They like it best when it’s all messed up. You know what I mean? They like it best when it’s confusing and difficult.
Galloway: Complexity is the tax on the poor and on small- and medium-sized businesses. And like I said, if you can navigate by star light, you want to race boats at night with a lot of islands and obstacles. And the reason banks don’t like this is that they like to be able to do these ridiculous things in the Cayman Islands and figure out a way that they pay lower taxes than someone who owns seven dry cleaners. So this is a great move.
Swisher: We’ll see if they push it through correctly. It does have momentum, though. And it does have momentum because Biden’s talking about it, and they need the money from the pandemic. They need it. And these corporations have never done better, and they need to pay their fair share.
Pivot is produced by Rebecca Sananes.
This transcript has been edited for length and clarity.