Why governments across the globe are taxing major tech companies: Explained
In a landmark decision, 136 countries including India signed a pact to levy a minimum corporate tax of 15%. The pact would pave the way for governments across the globe to tax multinational companies where they operate. The step is part of a growing convergence that large multinational corporations are re-routing profits via low-tax jurisdictions in order to avoid paying taxes.
For over ten years the Organisation for Economic Co-operation and Development (OECD), which is mostly made up of developed economies, has led discussions on a minimum corporate tax rate. Next year, a multilateral convention will be signed. The greatest impact is likely to be felt by ‘Big Tech’ companies which have largely chosen low-tax jurisdictions to base their operations.
The new proposal aims to limit multinational companies’ ability to engage in profit-shifting by requiring them to pay at least some of their taxes where they do operate. Earlier, in April this year, US Treasury Secretary Janet Yellen urged the world’s 20 advanced economies to adopt a minimum global corporate income tax. At this time, the US Government benefits from a global agreement. Similar is the case with most other Western European countries, even though some low-tax European jurisdictions, such as the Netherlands, Ireland and Luxembourg, as well as some Caribbean jurisdictions rely heavily on tax rate comparative advantage to attract MNCs.
It is pertinent to note that the IMF has also expressed some interest in the proposal. While China is unlikely to object seriously to the US call, Beijing is concerned about the impact on Hong Kong, which is the world’s seventh-largest tax haven, as per a study published earlier this year by the advocacy group Tax Justice Network. Furthermore, China’s strained relationship with the United States may act as a deterrent in negotiations.
How will this affect big tech companies?
Apart from low-tax jurisdictions, the proposals are tailored to address the low effective tax rates paid by some of the world’s largest corporations, including big tech behemoths such as Apple, Alphabet and Facebook, as well as Nike and Starbucks. These giants will have to pay taxes in the country of their operation. Importantly, these firms generally depend on complex webs of subsidiaries to divert profits from big markets to low-tax jurisdictions such as Ireland, the British Virgin Islands, the Bahamas or Panama.
(Source: International Business Times – By Ashish Shukla, 13th October, 2021)
II. Technology
Karnataka to set up Startup Silicon Valley Bridge
On 19th November, 2021, Karnataka’s Minister for Electronics announced the setting up of a ‘Startup Silicon Valley Bridge’ to help skilled employees to work for Startups located in the US’ Silicon Valley. He said the Government has received invitations from various participating countries in the BTS-2021 to visit their countries to further strengthen investment ties.
Dr. C.N. Aswath Narayan, who is the State’s Minister for Electronics, IT, BT and S&T, Higher Education, Skill Development, Entrepreneurship and Livelihood, pointed out that Startups located in the US’ Silicon Valley are facing human resource shortage.
In his valedictory address at the 24th edition of the ‘Bengaluru Tech Summit-2021’ (BTS), he said the bridge will also serve as a connection between Startups of both the countries, enabling sharing of knowledge and other resources as part of the new initiative.
Further, a ‘Beyond Bengaluru Startup Grid’ will be set up to facilitate growth of emerging industries in other cities outside Bengaluru.
Taking a cue from the success story of India’s leading stock broking company Zerodha, a home-grown fin-tech venture, Dr. Narayan announced the constitution of a fin-tech task force to attract investments in the financial sector.
The Government plans to set up a Centre of Excellence (CoE) and a back office in Mangaluru for the purpose.
An entrepreneur has evinced interest in setting up an electric battery manufacturing unit at Hubballi, he said.
As for the BTS-2021, it has attracted investments to the tune of over Rs. 5,000 crores in the aftermath of the announcement of the Government’s new ESDM policy with industries evincing interest in setting up semi-conductor plants, motors for air conditioners, solar cell units, and electric vehicles, among others.
Notwithstanding the raging pandemic, Dr. Narayan said a million people had changed jobs in the last six months and another 400,000 candidates were getting ready for employment.
He said that for the first time, organisers conducted pre-events in the cities of Mangaluru, Hubballi and Mysuru in the run-up to BTS-2021 to promote the concept of industries going beyond Bengaluru.
‘Tech Summit’ was held in these clusters with strong participation notwithstanding the pandemic, he said.
The Government of Karnataka has received invitations from various participating countries in the BTS-2021 to visit their countries to further strengthen investment ties.
The Sydney Conclave and the Indo-US Conclave were successes as these saw interactions between the Prime Ministers of India and Australia and the US Consul-General in Chennai.
Dr. Narayan added that the 25th edition (silver jubilee) of the BTS to be held in 2022 (between 16th and 18th November) will be bigger and better and no effort will be spared to make it grand and more successful than its previous editions.
(Source: International Business Times – By IANS, 20th November, 2021)
III. Science
Space will be first home for humans, and earth will be a holiday destination: Jeff Bezos
Jeff Bezos is widely considered a visionary in the modern world and he is one of those billionaires on planet earth who believes in the future of space colonisation. And now, he has predicted that the future will witness human beings giving birth to children in space and over the course of time the planet earth will become a holiday destination.
Jeff Bezos made this prediction during a surprise appearance at the 2021 Ignatius Forum in Washington, DC.
‘Over centuries, many people will be born in space, it will be their first home. They will be born on these colonies, live on these colonies, then they’ll visit Earth the way you would visit, you know, Yellowstone National Park,’ he said during the event.
Future space colonies: Vision of Jeff Bezos
According to a report published in The Guardian, Jeff Bezos had once claimed that the future will have floating space colonies with weather like Maui all year long.
‘This is Maui on its best day, all year long. No rain. No earthquakes. People are going to want to live here.’
Jeff Bezos is not the only billionaire who dreams of future space colonisation. SpaceX founder Elon Musk has a strong action plan to take humans to Mars. He had several times claimed that humans are the only conscious beings in the universe, and he believes that we should use this consciousness to emerge as a multi-planetary species.
At one point in time, Elon Musk had revealed that the future government that will be set up on the Red Planet will be based on direct democracy. He also made it clear that people will have a direct role in the decision-making process in the future Martian government.
(Source: International Business Times – By Nirmal Narayanan, 15th November, 2021)
